IT HAS been a remarkable year for Samsung Electronics. Last weekend, the company was one of the stars at the giant consumer-electronics show in Las Vegas, where it unveiled a glittering array of new products. Among them was a notable first: a mobile phone that uses voice-recognition technology to convert speech into text messages, offering respite to people who find typing messages on their mobiles tiny keyboard frustrating. Another Samsung model automatically scans business cards and inserts the details into the users address book. Just as impressive is the fact that this week Samsung will announce record-breaking annual results, not just as South Koreas most profitable, but also as its most visible, company. Samsung has edged closer to its Japanese rival Sony as the worlds leading consumer-electronics firm. It is already the largest producer of many digital devices. It is poised to overtake Americas Motorola as the worlds second-biggest maker of mobile phones. Yet even as Samsung was closing the books on a triumphant 2004, its future was looking less certain. The Korean won soared to a seven-year high against the dollar, reducing the value of much of its overseas earnings. While electronic gadgets such as digital cameras, mobile phones and flat-screen televisions remain as popular as ever, prices are falling. That cuts into Samsungs profit margins. Worst of all, the companys memory-chip business, by far its most profitable operation in 2004, is facing harder times as the notoriously cyclical semiconductor industry enters yet another downturn. For Samsungs bosses, this may seem dishearteningly familiar. In 1995 the company also smashed earnings records, only to see chip prices tumble and currencies head into turmoil. By the dark days of the 1997 Asian economic crisis, Samsung was deep in debt and heading towards bankruptcy. But this time things should be different. The company has now been transformed in so many ways, maintains Yun Jong-yong, a company veteran who took over as chief executive in 1996, that it can not only weather the coming storm, but will sail on to even greater things. Mr Yun has to plot an ambitious course. The companys strategy is based on providing leading-edge, stylish products that can be sold for a premium. “If we were to compete only on price,“ admits one executive, “the Chinese would slaughter us.“ So far, the strategy has paid off handsomely. Boosted by margins of more than 40% on semiconductors in the second quarter of 2004, Samsung Electronics profits began to rise rapidly. By the third quarter, the companys net profit was already almost twice what it earned in the whole of 2003 (see chart). Then the signs of trouble began. Nevertheless, despite the recent slowdown in earnings, as The Economist went to press analysts were confidently expecting the company to report an annual net profit of around 10 trillion won ($9.5 billion) on January 14th. That is excellent by any measure. But it is not just with its earnings that Samsung wants to impress. The company is also investing heavily to ensure that history does not repeat itself. Research and development accounted for $2.9 billion in 2003, around 8% of revenue. More than 20,000 of Samsungs 88,000 employees work as researchers in 15 R lots of its futuristic gadgets appeared in the cult movie “Matrix Reloaded“. And the company decided to become a principal sponsor of the Olympic Games. Following the success of the Athens games last year, this has paid off, with another big increase in consumer awareness of its brand. Mr Kim more than doubled Samsungs annual marketing budget to about $3 billion. In September last year, Mr Kim suddenly decamped to join Intel, Samsungs main chipmaking rival and a company that harbours its own ambitions to expand into consumer products. Gregory Lee, who has worked with a number of American consumer-goods companies, took on the role, inheriting a global review of Samsungs advertising. The complexity of modern consumer marketing has led some big companies to want to deal primarily with just the parent company of one of the handful of global advertising groups rather than trying to manage lots of specialist agencies. WPP, a British-based group, won that central role for Samsung. Planning is now under way for the next big campaign. According to Interbrand, a consultancy, the value of Samsungs brand is now close to that of Sony. However, the South Korean company is “not yet a brand that can live without the product,“ says Jan Lindemann, Interbrands head of brand valuation. The next step is to encourage customers to turn to the Samsung brand before they think about what product to buy, rather than being led to the brand by an interesting device. To get to that iconic status, Samsung has to be perceived as even more “cool“ than it is today. But there was something else that allowed Samsung to transform itself. There are times in any industry when a step change in technology lets new leaders