Samsung eyes success in other galaxies Choi Gee-sung, Samsung Electronics" outgoing chief executive, led the South Korean company to record profits as it became the world's biggest seller of handsets and televisions. As new head of business development at the parent Samsung Group, he now has a much bigger task: ensuring Samsung's long-term survival by repeating that success in the less likely sectors of solar cells, light-emitting diodes, and biotechnology. His success or failure could have a big impact on how smooth Samsung's upcoming succession will be. Control over strategic decisions at the world's biggest technology group by sales is held firmly in the hands of Lee Kun-hee, Samsung's 70-year-old chairman. Ever since his return to management in 2010 Mr Lee's orders have been clear: Samsung must diversify into new businesses. Even as Samsung grew rapidly over the past two years in its branded consumer electronics business, vying with Apple for dominance in smartphones and tablets, Mr Lee has forecast that most of the group's current businesses and products will disappear in 10 years. But with Mr Lee in frail health, analysts believe that the job of ensuring Samsung's future survival will fall to Jay Lee, the group's heir apparent. Hence this month's appointment of Mr Choi - widely seen as a mentor to the younger Mr Lee - to his new role at the parent Samsung Group. "Jay Lee needs the new business to be successful to prove his management ability and strengthen his grip of power," says Chung Sun-sup, head of chaebul.com, an online information provider on the country's industrial conglomerates. Samsung has identified five businesses - solar cells, rechargeable batteries for hybrid cars, LED technology, biopharmaceuticals and medical equipment - as its future growth drivers and pledged to invest about $21bn by 2020. But so far the signs are not promising and little progress has been made. Samsung does not reveal financial data for these businesses but Park Kang-ho, analyst at Daishin Securities, estimates that they now account for less than 3 per cent of Samsung Group's total revenues of Won273tn and have yet to contribute to its earnings. Analysts estimate that the group's solar cell business posted more than Won50bn in operating losses last year. Samsung also faces political pressure to dispose of its LED business after the South Korean government last year designated it as a sector suitable for small and medium-sized companies. Both the solar cells and LED segments have suffered from oversupply and falling demand as a result of the global economic slowdown. Some analysts question whether Samsung should be looking to diversify at all. Greg Roh at HMC Securities said Samsung's focus should be on ensuring its core business stays ahead of rivals. I don't think that rapid expansion into new businesses is such a good idea at this point. Rather, Samsung should focus all its resources and investments into its strong areas such as speciality chips or smartphones to cement its leadership," he said. Chaebul.com's Mr Chung says Samsung may find it hard to translate its current success to the new areas. "If you think that Samsung can do well in any business, that is a fantasy," he said. The only bright spot among the new businesses seems to be medical equipment manufacturing. Analysts say Samsung was able to make rapid inroads into the healthcare market through acquisitions. Samsung has bought Nexus, a maker of cardiac testing solutions; Medison, a leading domestic medical equipment maker, and another local firm, Ray, an X-ray machine manufacturer. Samsung also entered a joint venture with US biopharmaceutical company Quintiles last year, pledging to invest Won2.1tn in the burgeoning sector. Samsung BioLogics plans to launch generic versions of biological medicines by 2015 at half current western prices as it gears up to challenge US and European pharmaceutical firms. But even the healthcare business has not yet contributed much to the group's earnings. Analysts say Samsung will probably need to rely on acquisitions rather than organic growth to develop its new businesses. Daishin's Mr Park says: "Samsung has enough cash to pursue further acquisitions, which are the easiest way to gain a foothold in new businesses. It will probably look for software makers or biotech companies with core technology. But what the company probably needs most of all is more time. Peter Yu, analyst at BNP Paribas, points out that it has only been a few years since Samsung outlined its new blueprint, "so it is too early to talk about its success or failure." Samsung still looks like it has plenty of time, given the upwards trajectory of its smartphone business. But as Nokia and Research In Motion have shown, it is never too early to start worrying about the future.