Samsung Electronics in belt-tightening mode

In the wake of an earnings shock in the second quarter, Samsung Electronics, the world’s largest smartphone maker, is making all-out efforts to cut costs.

“Samsung is tightening its belt as it is forecast to face tougher competition in the global smartphone market,” industry watchers said.

The Korean firm’s operating profit plummeted 25 percent on-year to 7.2 trillion won in the April-June period, the lowest in two years, according to the Korean headquarters.

One of the electronics giant’s latest operational cost-cutting measures is trimming down business trip expenses.

Samsung Electronics reportedly held a briefing session with 26 global airlines last month to explain the firm’s new policy for overseas business trips. Under the policy, the tech giant would accept bids to select an exclusive airline by route to attain the cheapest airfare by destination.

After the bids, the company’s executives and employees will fly exclusively with the chosen airlines.

“The plan was planned earlier this year to raise efficiency for business trips overseas,’’ an official from the tech giant said.

With the measure, the company reportedly aims to save up to 20 percent in business trip expenses. Last year, the global tech firm spent around 49 billion won ($38 million) on airfare.

Rumors have flared that the company might carry out restructuring plans in labor costs by the end of this year.

“It could be a possible scenario for Samsung Electronics to start downsizing up to 20 percent of its executives, streamlining subcontractors, unless it see a business pick-up in near future,” industry sources said.

Reproaching themselves for the lackluster business performance, more than 100 executives at the mobile business unit of the electronics firm returned a quarter of their incentives, amounting to 3 billion won ($2.9 million), in July.

The world’s largest smartphone maker has encountered an uphill battle to keep its leadership in the global mobile market as Chinese smartphone manufacturers are posing a challenge with their budget smartphones.

In the Chinese market, Xiaomi overtook Samsung, which had led for the past two years, by grabbing a 14 percent market share in the second quarter while Samsung’s market share slipped to 12 percent, according to global research institute Canalys.

By Kim Young-won (wone0102@heraldcorp.com)