[This Week's Focus] Samsung SDS Leads 'Hyperautomation' Innovation with Generative AI

Advancement of AI Services for Work Automation
Expectations Rise for Benefits from Financial Sector Network Separation Regulation Relaxation
Corporate Value Enhancement Anticipated through Net Cash Utilization

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In the era of artificial intelligence (AI), Samsung SDS is eyeing new opportunities. Samsung SDS is leading the market by presenting cloud, AI, solutions, and smart factory as its four strategic business areas in the IT services sector. Particularly in the generative AI field, where it is putting strong emphasis, the company aims to realize hyper-automation innovation by collaborating with global partners such as Dell Technologies, Microsoft, and NVIDIA. Industry experts expect generative AI solutions to emerge in earnest from the second half of this year, a year and a half after the launch of ChatGPT, and attention is focused on whether Samsung SDS can seize this opportunity to write a unique growth story.

Automating Work with Generative AI: "Beyond Copilot, Entering the Agent Era"

[Image source=Yonhap News]

Recently, Samsung SDS announced a more concrete generative AI model. At the 'Real Summit 2024' held on the 3rd at COEX in Gangnam-gu, Seoul, Samsung SDS emphasized that AI is evolving beyond the 'copilot' stage, where it assists human work, to the 'agent' level, which automates tasks. They introduced cases where over 100 companies and more than 150,000 customers have adopted agents in various fields such as purchasing, logistics, and management support.

Hwang Sung-woo, CEO of Samsung SDS, stated in his keynote speech, "With the advancement of generative AI, computer interfaces are changing to operate by listening to natural language commands and understanding human intentions," adding, "We will continue to advance generative AI services such as Fabrics and Brity Copilot."

Fabrics is a platform that connects a company's data, knowledge assets, systems, and other IT resources with generative AI to perform tasks. Users can create desired generative AI models using large language models (LLMs) through Fabrics. Samsung SDS plans to offer Fabrics based on Microsoft's cloud service Azure, enabling global customers to utilize it.

Brity Copilot, launched earlier this year alongside Fabrics, is a generative AI integrated into Samsung Group's collaboration solution, Brity Works. Through Brity Copilot, users can access chatbot and robotic process automation (RPA) functions across various areas such as email, messenger, and drive. Samsung SDS plans to add Vietnamese to the current real-time translation languages of Korean and English within this year and provide simultaneous interpretation.

Junseop Kim, a researcher at KB Securities, said, "Currently, most of Samsung SDS's cloud platform customers are domestic companies, including Samsung Group affiliates, but the customer base will expand once services are offered on Microsoft Azure." He added, "Furthermore, if the new service 'Personal Agent' of Brity Copilot gains attention, sales of other AI solutions will be promoted."

Samsung SDS is not only selling AI models like Fabrics and Brity Copilot but also striving to improve profitability by applying them to its own operations. In fact, Samsung SDS has automated 549 tasks, about 13% of its 4,000 business processes, by integrating generative AI. Furthermore, it plans to use AI models for 25% of all tasks by 2025. The goal is to increase productivity and, in the long term, boost revenue or reduce costs.

Expectations for Financial Sector Network Separation Relaxation... Samsung SDS to Benefit with Established References

Expectations are rising that the relaxation of network separation regulations in the financial sector will benefit Samsung SDS. On the 13th of last month, the Financial Services Commission announced a 'Financial Sector Network Separation Improvement Roadmap,' stating that it will ease regulations that currently require physical disconnection from the internet in the financial sector.

Industry voices have long called for regulatory improvements, citing inefficiencies and difficulties in research and development caused by network separation in financial companies. The Financial Services Commission plans to pursue network separation improvement policies to find a new balance between innovation and security.

Sujin Kim, a researcher at Mirae Asset Securities, noted, "As the software market rapidly shifts from on-premises IT systems to cloud-based systems, the use of generative AI is becoming crucial for financial competitiveness." She added, "However, network separation not only causes operational inconveniences but also blocks the use of new technologies." She further pointed out, "Some financial companies build environments isolated from external communications, neglecting the adoption of advanced security systems, which leads to side effects. Therefore, improving network separation is essential for enhancing financial industry competitiveness and advancing financial security systems."

This network separation improvement policy, aimed at boosting competitiveness across the financial industry, is expected to contribute to improving work productivity by promoting the adoption of AI cloud-based work automation in the financial and public sectors. In particular, Samsung SDS has secured market dominance in generative AI and consecutively won generative AI construction projects ordered by multiple banks. It is also gaining attention by achieving results in various AI platform pilot projects in the public sector.

Changyoung Lee, a researcher at Yuanta Securities, said, "Based on its experience in building systems for Samsung Group affiliates, Samsung SDS will expand its scope from winning AI platform contracts in the banking sector to the financial and public sectors, including insurance." He added, "Samsung SDS is leading the domestic AI cloud service market, including Platform as a Service (PaaS), Infrastructure as a Service (IaaS), and Software as a Service (SaaS). The faster companies adopt generative AI, the more Samsung SDS will benefit."

Over 5 Trillion Won in Cash Reserves... Potential Use for Shareholder Returns

The securities industry also views the possibility that Samsung SDS may announce a new shareholder return policy based on its cash reserves of approximately 5.4 trillion won on a consolidated basis as a positive factor. In its second-quarter earnings announcement, Samsung SDS mentioned that it would use its cash assets not only for growth investments such as research and development (R&D) and data centers but also actively respond to value-up programs. Investors are currently awaiting Samsung SDS's plans to enhance corporate value.

Donghwan Oh, a researcher at Samsung Securities, said, "There is growing market demand for the use of cash reserves," adding, "It is necessary to enhance corporate value by improving earnings per share (EPS) through inorganic growth via mergers and acquisitions (M&A) or continuous share buybacks and cancellations." He also noted, "While some businesses such as AI-related solutions and cloud services continue to see high sales growth, overall IT service sales are in a low-growth phase due to the conservative investment stance of group companies. To achieve additional valuation increases, strengthening shareholder return policies or recovering sales growth rates is necessary."

Hajeong Kim, a researcher at Daol Investment & Securities, analyzed, "Despite recording strong second-quarter earnings, the stock price only rose slightly," explaining, "Cash reserves are accumulating, but shareholder returns have not been concretized, and the timing is uncertain." She added, "Although performance is gradually improving, the market is waiting for a specific catalyst for stock price increases."