How Samsung Became the World’s No. 1 Smartphone Maker

I’m in a black Mercedes-Benz (DAI:GR) van with three Samsung Electronics PR people heading toward Yongin, a city about 45 minutes south of Seoul. Yongin is South Korea’s Orlando: a nondescript, fast-growing city known for its tourist attractions, especially Everland Resort, the country’s largest theme park. But the van isn’t going to Everland. We’re headed to a far more profitable theme park: the Samsung Human Resources Development Center, where the theme just happens to be Samsung.

The complex’s formal name is Changjo Kwan, which translates as Creativity Institute. It’s a massive structure with a traditional Korean roof, set in parklike surroundings. In a breezeway, a map carved in stone tiles divides the earth into two categories: countries where Samsung conducts business, indicated by blue lights; and countries where Samsung will conduct business, indicated by red. The map is mostly blue. In the lobby, an engraving in Korean and English proclaims: “We will devote our human resources and technology to create superior products and services, thereby contributing to a better global society.” Another sign says in English: “Go! Go! Go

More than 50,000 employees pass through Changjo Kwan and its sister facilities in a given year. In sessions that last anywhere from a few days to several months, they are inculcated in all things Samsung: They learn about the three P’s (products, process, and people); they learn about “global management” so that Samsung can expand into new markets; some employees go through the exercise of making kimchi together, to learn about teamwork and Korean culture.

Video: Exclusive: What’s in Samsung’s Secret Sauce

They will stay in single or shared rooms, depending on seniority, on floors named and themed after artists. The Magritte floor has clouds on the carpet and upside-down table lamps on the ceiling. In a hallway, the recorded voice of a man speaking Korean comes over the loudspeakers. “Those are some remarks the chairman made some years ago,” a Samsung employee explains.

She’s referring to Lee Kun Hee, the 71-year-old chairman of Samsung Electronics, who declined to be interviewed for this article. Despite making headlines in 2008, when he was convicted of tax evasion, and 2009, when he was pardoned by South Korea’s president, he maintains a low profile. Except within Samsung, that is, where he’s omnipresent. It’s not just the slogans over the sound system; Samsung’s internal practices and external strategies—from how TVs are designed to the company’s philosophy of “perpetual crisis”—all spring from the codified teachings of the chairman

Since Lee took control of Samsung in 1987, sales have surged to $179 billion last year, making it the world’s largest electronics company by revenue. That makes Samsung Electronics the world’s largest electronics company by revenue. For all its global reach, though, the company remains opaque. We all know the story of Steve Jobs and Apple (AAPL), Akio Morita and Sony (SNE). But Samsung and Lee Kun Hee? People may bring up the South Korean government’s support of local champions and access to easy capital, but within the company it all goes back to Chairman Lee and the Frankfurt Room.

Story: The iPhone 5’s A6 Chip Could Be Apple’s Sweetest Revenge Against Samsung

It doesn’t look like much: early 1990s vintage décor and a large table with a fake flower centerpiece. But the Frankfurt Room is to Changjo Kwan as the Clementine Chapel is to St. Peter’s Basilica: an extra-special place inside an already special place. Photography is forbidden; people whisper when inside. It’s a meticulous recreation of the drab conference room in the German hotel where, in 1993, Chairman Lee gathered his lieutenants and laid out a plan to transform Samsung, then a second-tier TV manufacturer, into the biggest, most powerful electronics manufacturer on earth. It would require going from a high-volume, low-quality manufacturer to a high-quality one, even if that meant sacrificing sales. It would mean looking past the borders of South Korea and taking on the world.

Samsung is having a moment. It’s dominant in TVs and sells a lot of washing machines, but it’s smartphones that made Samsung as recognizable a presence around the world as Walt Disney (DIS) and Toyota Motor (TM). If Samsung isn’t yet as lustrous a brand as Apple, it’s finding success as the anti-Apple—Galaxy smartphones outsell iPhones. And Samsung is probably the only other company that can throw a product introduction and have people line up around a city block, as they did in New York City on March 14 for the launch of the Galaxy S 4. That never used to happen when Samsung unveiled a refrigerator—although the kimchi-specific models made for the Korean market are really quite impressive