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Samsung embarking on an aggressive expansion in Silicon Valley

South Korean tech giant Samsung's move to broaden its footprint in Silicon Valley signals an escalation of its rivalry with Apple.

February 18, 2013|By Chris O'Brien, Los Angeles Times

• A start-up incubator in downtown Palo Alto, just a couple of miles from the Stanford University campus. Although the company has confirmed the project, it has released no details.

A major expansion of its R&D center, known as Samsung Information Systems America, into two six-story buildings under construction in San Jose.

The opening of the Samsung Strategy and Innovation Center on the valley's famed Sand Hill Road, the heart of the region's venture capital industry. The center will be run by Sohn and will house a group of research fellows while providing a place for the company's various product divisions to partner with local entrepreneurs and researchers.

Increased venture capital investment through Samsung Ventures, which has offices in San Jose and is already one of the largest corporate venture funds in the world, with $1 billion in assets. Sohn said the company plans to ramp up investments in the United States, where it already targets 80% of its funding. It's also creating a new $100-million early stage fund.

A new $300-million campus for its U.S. semiconductor headquarters boasting a remarkable, open-air design that promises to rival Apple's new campus and Facebook Inc.'s Frank Gehry-designed expansion for the region's most eye-catching high-tech building.

The semiconductor campus was significant enough that Gov. Jerry Brown singled it out for praise in his State of the State speech last month. Brown thanked the state's economic development team for persuading Samsung to expand its San Jose center, rather than moving it elsewhere. "The new facility in San Jose will place at least 2,500 people in high-skill, high-wage jobs," Brown said.

These efforts are part of a larger strategy by Samsung to establish R&D centers in entrepreneurial centers around the globe. But it's clear that the centerpiece will be Silicon Valley, where Samsung will grow from a few hundred employees to "several thousand" by 2020, Sohn said.

With Apple and Google engaged in their own furious expansions in Silicon Valley, the region's concentration of talent makes it crucial that any serious competitor like Samsung be in the valley if it wants to compete for those workers.

"Samsung has to be here because everything happens here in Silicon Valley," said Carolina Milanesi, vice president of research for consumer technologies and markets at Gartner Inc. "You have to be present in the place where all your competitors are."

Sohn said Samsung hopes to show would-be partners the potential advantages of working with the company. And it intends to use its Silicon Valley base to scour the country for ideas and talent.

One of the best examples of that new approach can be seen in its recent backing of OpenX, a Pasadena digital ad exchange.

In January, OpenX announced it had raised $22.5 million in venture capital in a round led by Samsung Ventures. The investment is an example of how a company known best for its hardware is trying to move deeper into software and services.

"It's been one of our most significant investments to date," said Brannon Lacey, Samsung Ventures' principal. "And that speaks to how highly we think of OpenX."

In the case of OpenX, however, the investment was also the culmination of a relationship, rather than just the start of one. In April, Samsung partnered with OpenX to run its new digital advertising service. After months of working together, Samsung decided to make the investment.

OpenX Chief Executive Tim Cadogan said Samsung has impressed with its eagerness to listen and learn, and work with his company. Although U.S. entrepreneurs may be unfamiliar with Samsung, he expects that to change quickly. Cadogan said Samsung's size and its ability to quickly distribute new technologies around the globe, thanks to its smartphone market share, is going to make the company an attractive ally for start-ups.

"I think they're going to get a lot of attention," Cadogan said. "There's a lot of interest in what they're trying to do. We're very pleased to be an early symbol of that new strategy."

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