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Samsung Jumps on the Blockchain Bandwagon

Sam Kim
A motorcyclist rides past the Samsung Electronics Vietnam Co. Plant at Yen Phong Industrial Park in Bac Ninh Province, Vietnam, on Thursday, Sept. 1, 2016. Samsung Electronics Co. and its affiliate have built a factory town with 45,000 young workers and hundreds of foreign component suppliers -- a miniature version of the family-run chaebol conglomerates that dominate business back in Korea. The investment has been a windfall for businesses in Bac Ninh -- almost 2,000 new hotels and restaurants opened between 2011 and 2015 according to the provincial statistics office -- helping raise the province's per capita GDP to three times the national average.

The world’s biggest maker of smartphones and semiconductors may use the technology behind cryptocurrencies to manage its vast global supply network.

Samsung Electronics Co. is considering a blockchain ledger system to keep track of global shipments worth tens of billion of dollars a year, according to Song Kwang-woo, the blockchain chief at Samsung SDS Co., the group’s logistical and information and technology arm. The system could cut shipping costs by 20 percent, according to SDS.

While companies around the world have said they’re planning to deploy blockchain technology on everything from cross-border payments to tracking the life-cycle of supermarket chickens , Samsung Group is one of the first global manufacturers to take a serious look at using the distributed ledgers in its operations. SDS is working on the system for Samsung Electronics, the conglomerate’s crown jewel.

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“It will have an enormous impact on the supply chains of manufacturing industries,” said Song, who’s also a vice president at SDS. “Blockchain is a core platform to fuel our digital transformation.”

Click here for a QuickTake explainer on blockchain technology.

Thrust into the spotlight by bitcoin’s meteoric rise , blockchain technology has been touted as a breakthrough that will transform the way transactions are recorded, verified and shared. While its impact on the corporate world has been limited so far, Gartner Inc. predicts blockchain-related businesses will create $176 billion of value by 2025.

Blockchain proponents in the shipping industry say the technology reduces the time needed to send paperwork back and forth and to coordinate with port authorities. Documentation costs for container shipments are more than twice as big as those for transportation, according to International Business Machines Corp., which is working with A.P. Moeller-Maersk A/S to track cargo movements and automate shipping paperwork.

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SDS expects to handle 488,000 tons of air cargo and 1 million 20-foot-equivalent (TEU) shipping units this year. That would include organic light-emitting diode displays and Galaxy S9 phones made by Samsung Electronics. A blockchain system may help the company reduce the time lag between product launches and actual shipments, making it easier to respond to rival products and shifting consumer appetites in emerging markets like China, according to Cheong Tae-su, professor of industrial engineering at Korea University in Seoul.

“It cuts overhead and eliminates bottlenecks,” Cheong said. “It’s about maximizing supply efficiency and visibility, which translates into greater consumer confidence.”

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