The Only Korea Threat it’s Called SamSung

The lead story in The Daily Beast on April 11 asked the question on many people’s minds: “How Scared Should You Be About North Korea?” I’m no political scientist, but I’ll give you my answer anyway: not at all.

While China may have wider-ranging ambitions than most people realize, it has always been obvious to me that tin-pot dictators have but one objective, which is to remain in power. Kim Jong-un is just settling into his position as the top dog in North Korea. Why would he jeopardize that by doing something so stupid as starting a nuclear war? No matter what the particulars, every possible series of events that comes after that move has one thing in common: Kim Jong-un will be dead at the end of it. All the saber-rattling isn’t to scareus; it’s to scare his own people into continuing to do as they are told. It seems to work, too.

In other words, the threat of North Korea is what it’s always been, which is pretty much nothing. So don’t listen to the Pentagon. What’s the real Korean threat? The one that consists of someone actually doing something as opposed to just saying something? That would be Samsung.

While it’s unlikely that the giant South Korean conglomerate will launch any real missiles anytime soon, the economic warfare that the company has been engaged in for the better part of 30 years has been as successful as any military campaign in modern history. If you want to know who’s really taking over the world, I suggest you do as Xavier de Maistre would do and take a journey around your room. Look at everything—your TV, DVD player, cellphone, tablet, laptop, PC (if you still have one), printer, monitor, camera, washer, dryer, fridge, microwave, dishwasher, stove and vacuum cleaner. I’m sure I’ve left something out, but I’m also sure that Samsung will have made one of the above things in your house.

Read your news with a paranoid tilt, and pretty much any story about Samsung can sound like John Le Carre on the Korean Peninsula. When employees arrive in their “appointed” country, says the president of Samsung’s human resources center, “They don’t work.” What, pray tell, are they doing instead? “They are given three missions,” Tae Gyun Shin told Bloomberg BusinessWeek. “Learn the local language, learn the local culture, and become an expert in their specialty.” That’s the best kind of secret agent, right? The one that’s not secret at all, but who as a result is actually ultra-secret.

I haven’t seen that new Keri Russell spy show, The Americans, but they certainly have one thing wrong in it—the KGB isn’t much of a threat anymore. Warfare is economic now, and Russia is no danger to anyone’s GDP. Who is? China, Korea and Taiwan. Any questions? (While I do watch a lot of television, I try to keep myself to one spy show at a time. And let’s be honest here: there’s Archer and then there’s everything else.)

The chief concern of a number of Western commentators—particularly Mark Anderson of Strategic News Service—is that Samsung sits at the vanguard of a rolling army of mercantilist economies and their stalking-horse corporate entities. The “inventing” economies invent, says Mr. Anderson, and the mercantilist economies copy. Just don’t ask Samsung if that’s true. The company’s human resources development center is also called its “Creativity Institute.” It’s the kind of finger-in-the-eye nomenclature that Washington spin-masters adore—calling something the opposite of what it really is. Torture? Please. It’s called “enhanced interrogation” in these parts.

You have surely read, of course, of the increasingly one-on-one battle for smartphone supremacy between Apple and Samsung. It’s practically impossible to keep up with which company has the edge in their ongoing legal disputes, but let’s call a spade a spade: Samsung has been ripping off almost everything cool about the iPhone and the iPad for years now. Apple accused the South Korean company in court of “slavishly copying” its products. It’s not an overstatement. But does it even matter? Whatever the particular rulings, Samsung is just going to keep doing what it’s doing and pay the associated legal penalties along the way. It’s a cost of doing business. If you build those expenses into your model, the actual outcomes don’t even matter in the end.

Of course, Samsung does engage in some innovation of its own. But its product choices derive more from a throw-the-spaghetti-against-the-wall strategy than from some sort of design epiphany. When it came to figuring out what the right size for smartphones and tablets would be in different markets, Samsung didn’t do as Steve Jobs might have done and try to convince an Indian shaman to give him some peyote so he could look inside the mind of the modern consumer. They simply made every size and let customers decide. “Nobody had any idea what the right screen size was, so Samsung made all of them and saw which one worked,” Enders Analysis researcher Benedict Evans recently told Bloomberg BusinessWeek. “They’re not stopping to think. They’re just making more phones.”

We revere Steve Jobs in this country for his success, particularly in the 10 years or so before his death. But do you even know who runs Samsung Electronics? And do you know how long he’s been focused on global domination? We’re talking about the culmination of a 25-year plan. Since he took over in 1987, Lee Kun Hee, the 71-year-old chairman of Samsung Electronics, has had a single goal. And he’s reached it: Samsung is now the world’s largest electronics company, with sales of $179 billion.

But it really is a smartphone story when it comes down to it. Profits from Samsung’s mobile phone division top $5 billion annually, and it’s been creeping up the profit margin axis at the same time that Apple has been creeping down. Samsung’s Galaxy phones now outsell Apple’s iPhones by a significant margin. In the third quarter of 2012, Samsung’s Galaxy S III phone became the first smartphone to outsell the iPhone—18 million units to Apple’s 16.2 million—since Apple’s signature product took over the top slot years ago. In the first quarter of this year, some analysts think Samsung sold between 68 million and 70 million handsets (smartphones and otherwise), more than double Apple’s 30 million. Whereas Apple spent $235 million on advertising iPhones in the U.S. in 2011 to Samsung’s $78 million, last year those tables were turned as well: Samsung spent $401 million to Apple’s $333 million. Call it what you want, folks. This is war.

But it’s a war of the strangest kind. Amazingly, Apple is Samsung’s single-largest customer for displays and semiconductors. I cannot think of a better way to determine your enemy’s plans than to simply have that enemy send them to you.

Over the past five years, Apple stock has returned 195 percent to investors. Samsung? 123 percent. That’s called spitting distance. But shrink your horizon to one year, and you’re spitting in the other direction: Apple is down 30 percent over the past 12 months while Samsung is up 14 percent. That’s a blow to all of us, isn’t it—or at the very least to those who are slaves to our own iPhones? You don’t want to be the soldier in the wrong army. Because it’s not going to be pretty in the end: Samsung is going to be standing over Apple’s grave ’til it’s sure that it’s dead.

Can Apple take back the lead? I doubt it, but stranger things happen every day. My own brother rolled into town last week and told me that he was moving his entire family to Bali for the next two years. I certainly didn’t see that one coming. Of course, when the lucky bastard calls me on Skype this fall so I can see his new surfboard, it’s a good bet that one of us will be using a Samsung product at the time.

editorial@observer.com