Samsung Executives Highlight Innovation, U.S. Investment at USITC Hearing
In testimony to the U.S. International Trade Commission (USITC) in Washington D.C. today, Tim Baxter, President and CEO of Samsung Electronics America and John Herrington, Senior Vice President and General Manager of Home Appliances for Samsung Electronics America addressed the company’s stance on the commission’s Global Safeguard (Section 201) Investigation into Large Residential Washers. The below text reflects their full testimonies.
STATEMENT OF TIM BAXTER
PRESIDENT AND CEO OF SAMSUNG ELECTRONICS NORTH AMERICA
Thank you. I’m Tim Baxter, President and CEO of Samsung Electronics North America.
You’ve heard a lot this morning about the way the opposition believes we run our business. Please allow me to explain how Samsung has thoughtfully built our brand in the United States.
Samsung has a DNA that is all about anticipating change, driving innovation, speed to market, listening to consumers and retailers, and investing in our employees and communities.
Next year, we will celebrate 40 years of investing in American jobs. From humble beginnings in 1978, we have grown to over 18,500 members of the Samsung-U.S. family, located in 46 states.
We have invested tens of billions of dollars in facilities across the country.
In 2016 alone, Samsung invested more than $10 billion in U.S.-based companies.
Our footprint expands across the nation, including:
- Our R&D center in Mountain View, California, where we develop new content and interfaces for our phones, TVs and appliances;
- Our Samsung 837 marketing hub in the heart of New York City where we create innovative marketing and provide consumers with an opportunity to experience our products first-hand;
- And one of the largest foreign investments in the country: a $17 billion, state-of-the-art semiconductor facility in Austin, Texas, which has been home to more than 6,000 skilled-manufacturing and engineering jobs since 1996.
Also with me are HR representatives from our various businesses across the U.S. They represent and develop our talented workforce, which has grown to over 18,500 people.
I’ve been with Samsung for 11 years. In that time, we’ve made dramatic, game-changing innovations in all of our products. We anticipated technology and consumer shifts and, as you can see here, created new categories in the TV, mobile phone and home appliance markets.
This, coupled with our passion to connect with consumers, has helped Samsung become one of the fastest growing and world’s Top 10 brands, as measured by Interbrand.
We have applied this successful formula to numerous categories in consumer electronics and mobile phones.
Just as we did with phones and televisions, we listened to consumers and figured out how to bring innovative and stylish home appliances, including washers, to the connected home.
As my colleague John will shortly explain, we have been able to introduce new washers in the same way we launch our “next big thing” in smartphones and TVs. By doing so, we are not just presenting another iteration of the same old washing machine.
This strategy earned us a #1 ranking for six straight years in the J.D. Power index for customer satisfaction in both front-load and top-load washing machine categories.
And this approach has helped grow the home appliance and laundry market for everyone’s benefit. In fact, according to the Association of Home Appliance Manufacturers, between 2012-2016, the U.S. market for washers has expanded by 32 percent.
Because of our success, Samsung has been exploring ways to expand our footprint and establish an appliance production base in the United States; allowing us to capitalize on the skilled U.S. workforce and increase our proximity to the consumers who drive global trends.
On June 28, Samsung announced that it would open a state-of-the-art home appliance manufacturing plant in Newberry, South Carolina.
Today from Newberry, we have Sarah Fox, the head of General Affairs and Tony Fraley, our manufacturing plant manager, who I’m thrilled to say just recently joined Samsung to lead our new home appliance facility.
The $380 million facility will produce industry-leading home appliances and, as Congressman Ralph Norman stated this morning, will generate nearly 1,000 jobs by 2020. We envision that Newberry could very well grow to become Samsung’s Home Appliance Innovation Hub for North America.
As we ramp up the operation in Newberry, we will also work to find ways to engage and participate in the local community.
Nationally, since 2002, Samsung has provided more than $46 million to over 1,000 schools and community organizations.
We look forward to working with the Newberry community, as well.
I would like to close with this.
During my time at Samsung, our passion and commitment to our consumers has never wavered. We entered the laundry category 11 years ago, and worked every day to offer American consumers more choice, new features and never been done before innovation. While some of our competitors have looked inward, even when consumer trends were clearly changing, we chose a different path. That approach has allowed us to connect with new consumers, expand our U.S. footprint and employment, and deepen our relationship with the communities where we’re based.
We categorically reject Whirlpool’s assertions. We have invested, we have competed fairly and the consumers continue to vote with their wallet. Now we look forward to the start of our next 40 years by opening our facility in South Carolina to make the best home appliances for American consumers, by American workers.
I appreciate you taking the time to listen.
STATEMENT OF JOHN HERRINGTON
SENIOR VICE PRESIDENT AND GENERAL MANAGER OF SAMSUNG ELECTRONICS NORTH AMERICA
I am John Herrington, the Senior Vice President and General Manager of Home Appliances at Samsung Electronics America. I oversee U.S. sales and marketing of Home Appliances, including all laundry products, and have been with Samsung for 3 years. I have been in the home appliance business for the past 30 years. I am grateful to the Commission for this chance to provide an overview of our innovative and growing laundry appliance business.
As Tim Baxter emphasized, consumers in the United States associate the Samsung brand with high-end, innovative electronics and home appliances. We have worked hard to establish our reputation for cutting-edge, technologically-advanced products.
Since entering the U.S. home appliance market a decade ago, we have changed the way laundry appliances are marketed and sold in the United States.
Whirlpool is now seeking to lock us out of this market because they have not adequately responded to changing market dynamics.
It is important to understand how much the competitive landscape in the laundry category has changed over the past decade.
First, there have been revolutionary innovations to the user interface, fit feel and finish, and the integration of digital controls into washers and dryers. Second, consumer acceptance and preference for new appliance brands has grown significantly. And finally, the purchasing and research behavior of appliance shoppers has changed.
We positioned ourselves at the forefront of these changes and as a result we have earned strong consumer support.
Whirlpool, by contrast, has focused on its traditional marketing emphasizing performance and reliability. As a result, even though they continue to be successful in the laundry segment, Whirlpool missed the opportunity to capitalize on these trends and lost momentum with consumers across their multiple, cross-competing brands.
In the mid-2000’s, consumers walked into appliance showrooms and were greeted by a commissioned salesperson, who helped them navigate through a sea of white appliances with varying capacities and performance claims. Front load washers represented just a small portion of the total laundry washing machine market.
The game was beginning to change. New front load laundry choices entered the market from new brands – specifically Samsung and LG. These new entrants offered new form factors. For example, plastic knobs were replaced with heavy duty metal knobs. Controls went from analog to digital. End of cycle signals went from jarring buzzers to pleasant sounding chimes. Aesthetics became an important new purchasing factor.
Consumers loved these new products, and the front load laundry category grew – in turn prompting more innovation, broader retail distribution, and additional choices.
Then came color. In 2006 bright red front load washers and matching dryers entered the market. These new colors were placed in prominent positions in retail showrooms, breaking through the sea of white. While many manufacturers dismissed these trends as fads, Samsung continued pushing the envelope with more colors and sizes, more sophisticated controls, and sharper finishes. Consumers responded and the front load category continued to grow.
In fact, by 2009, the front load category represented over half of the total laundry revenue for the US market. Samsung and LG were the clear leaders. Domestic manufacturers were slow to invest and missed the trend.
Not only were the washers changing, but how and where consumers purchased them was changing.
In the past, it was common to walk into a store and meet with a salesperson who was commissioned to sell you a washer. Today, consumers walk into a store knowing what they want, and are met by a non-commissioned associate who facilitates the transaction.
In fact, in 2016, 74% percent of consumers researched their appliance online before shopping in store and 75% of Samsung’s products were sold on noncommissioned sales floors. It is clear that in this environment, innovative products and desirable and recognized brands are critical for success. Therefore we know that our brand and products need to stand on their own.
Samsung recognized these trends and focused on building a strong and differentiated brand connection with consumers. We partnered with growing retailers such as Lowes, Home Depot and Best Buy to improve the in store shopping experience. We created Samsung store within a store home appliance zones at retail to educate consumers on our products and improve the overall shopping experience. In addition we developed exciting marketing campaigns featuring our innovative products and improved our digital marketing activities.
While Whirlpool’s attention was diluted across multiple overlapping brands such as Maytag, Amana, Whirlpool, Kitchen Aid, and Jenn Air, Samsung was building its brand awareness and preference with consumers. In fact in the past three years brand awareness and brand preference levels have rivaled or surpassed that of Whirlpool and Maytag brands. And we have higher market share with the important growing and emerging millennial segment.
As our brand awareness has grown, we continue to listen to consumers and offer meaningful innovation.
- In 2015, we introduced activewash, a high efficiency top load washer with a built in sink for prewashing. We featured it in an advertising campaign and created another hit washer: Activewash models account for the majority of our increased sales since 2015.
- Less than a year later, in 2016, we introduced Addwash, the first front load washer with an additional door built in to add items to the wash after it was started.
- And this year, we launched FlexWash and FlexDry, the first washer and dryer pair that allows consumers to wash and dry two loads at the same time. You can see the FlexWash and FlexDry pair here in the room. FlexWash is both a front load and a top load washer, and there is nothing else like it.
These three examples illustrate innovations that consumers want and drive sales.
As you can see from FlexWash and FlexDry, they are a perfectly matched pair – an important aspect of the laundry category – washers and dryers are designed, marketed, priced, and sold in matching pairs.
All manufacturers understand this. For that reason marketing decisions are made on the basis of the laundry category as a whole.
As a rule, dryers cost less to produce than washers. There are fewer components, they are less complex and weigh significantly less than washers.
Even though dryers are much less expensive to make, matching washers and dryers are sold predominantly at the same retail price.
Because dryers cost less to produce but are sold at the same price, dryers are more profitable than washers across the board, by design. We evaluate the profitability of our laundry business, which includes both washers and dryers, on a combined basis. We can’t imagine other manufacturers looking at it any differently.
Whirlpool would like you to believe this is all about price. It’s not. Our success is driven by significant investments in our brand and great products.
In conclusion, Whirlpool had over 70% market share at the time it acquired Maytag, and had every opportunity to embrace the changing market.
The market shifted to front load washers. Whirlpool didn’t capitalize on this trend.
Consumer preferences shifted to design and style. Whirlpool didn’t keep pace.
How and where consumers shopped for appliances changed. Whirlpool didn’t adjust.
We have not harmed Whirlpool. Rather, we recognized and anticipated the changing market and drove new trends. Consumers responded by embracing our brand.
Thank you for your time and attention today.