The microwave oven was invented by engineers at Raytheon in the U.S. in the late 1940's. The idea for the microwave came when these engineers were working on radar techniques and discovered that a candy bar in the pocket of one engineer had melted. Raytheon developed the technology but felt that there was too limited of a market for microwave ovens in the U.S. The technology languished until Japanese companies, recognizing the utility of the microwave oven for the Japanese lifestyle, began production in the late 1960's. Only after the Japanese companies had established a dominant position in the market did an American company, General Electric, begin production. But American companies had a very difficult time matching Japanese prices. This was in part due to the lower production costs in Japan but there was also the factor of the willingness of Japanese companies to forego profits in the interest of achieving market share.
South Korea at that time, the middle 1970's, was not in the competition. South Korea was a poor, backward Third World country. Usually all that such countries can aspire to is low tech, old technology products. But South Korean businesses, driven by the economic plans and incentives of the Park Regime, were willing to gamble on products like microwave ovens.
In 1976 an executive at Samsung gave an engineer the assignment of developing a working protype of a microwave oven. The strategy for achieving this was nothing more than buying a microwave oven and taking it apart to see how to duplicate it. The cabinet, doors and plastic cavity in which food is heated were of no difficulty, but the heart of the device, the magnetron tube which produces the microwaves, was clearly beyond Korean industry at that time. Therefore the Samsung engineer set about producing a prototype oven based upon a magnetron tube purchased from Japan. After a year of eighty hour weeks the prototype was done. But when it was tested the plastic cavity immediately melted. It didn't look promising for South Korea to be able to enter the microwave market against Japanese and American companies which were producing millions of oven per year when Samsung, Korea's leading consumer electronics firm, was having such difficulty producing one working model. Nevertheless Samsung executives chose to continue the effort. Eventually the working prototype was achieved and limited production commenced. But the price in the six hundred dollar range was definitely too high for the South Korean market. Samsung salesmen were having a difficult time getting orders anywhere but finally an order for 240 units for Panama was landed.
In the U.S. the price range for microwave ovens was $350 to $400. The J.C. Penney company was looking for a source of microwave ovens that could be sold for $299 in their stores. Samsung got an order for a few thounsand ovens from J.C. Penney. Samsung lost money on the order but established itself in the U.S. microwave oven market. J.C. Penney came back to Samsung with another order for five thousand units.
About this time GE was having concerns about being able to continue to produce microwave ovens at its American plants in competition with Japanese imports. Although Japanese production costs were lower than GE's production cost, Samsung's production costs were even lower than those of Japan. Ira Magaziner provides some interesting cost comparison:
| Cost Category | GE Cost per oven | Samsung Cost per oven |
|---|---|---|
| Total | $218 | $155 |
| Assembly Labor | $8 | $0.63 |
| Overhead Labor | $30 | $0.73 |
| Material Handling | $4 | $0.12 |
| Line and Central Management | $10 | $0.02 |
When the head of GE's microwave oven division visited Samsung's research facilities he found they had about ten times as many engineers, most U.S. educated, as he had. This fact along with the comparative cost figures cited above led him to conclude that there was no reason to even try to compete and GE began purchasing its microwave ovens from Samsung.
There was one weakness of the Samsung microwave operation that needed correcting. Samsung was purchasing the magnetrons for its oven from Japanese companies which were also selling in its product market. It was unlikely that Samsung could take world market share away from those Japanese companies which had control of an essential component of Samsung's oven. Samsung considered buying the magnetrons it needed from Amperex of Rhode Island. Unfortunately Amperex was about to go out of magnetron business as a result of the competition in the magnetron field.
Samsung solved its magnetron problem by buying up Amperex's magnetron production plant, dismantling it and moving it to Korea Thus Samsung was able to grow to be the world's top producer of microwave ovens.
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