Samsung Electronics restructuring in the offing

The wind of change is about to blow through Samsung Electronics, especially its once vital but now lackluster mobile unit, early next month as it seeks to revitalize its ailing tech business.

Restructuring has become inevitable for South Korea’s largest company, which has been facing falling profitability amid increased competition from Chinese manufacturers.

Some industry watchers forecast the reshuffling could come as early as next week.

The company appears to be considering not only downsizing and reorganizing its domestic business but also its overseas operations in Europe, where plans include relocating its headquarters from London to Poland.

Various scenarios have emerged for the tech giant with some market analysts forecasting that its consumer electronics head Yoon Boo-keun will take over both the home appliance and mobile divisions in line with its plans to develop a connected home business.

Yoon is expected to replace the incumbent mobile chief Shin Jong-kyun, who has been mostly out of the spotlight since the poor performance of the Galaxy S5 and other smart devices.

Executive vice president Roh Tae-moon, who has been credited with developing key technologies for Samsung’s flagship smartphone, could further be promoted to head the mobile business in close partnership with consumer electronics, as soon as Yoon finishes paring down the mobile division.

“After completing the restructuring process, Yoon could pick his successor Roh to lead the mobile division,” said a person with knowledge of the situation. 

“It is possible that Yoon will head both the mobile and consumer electronics business divisions for the time being, then have Roh come onboard with a strategy to build a new business involving smart home and mobile tech.”

Yoon could follow the path of Choi Gee-sung, vice chairman of Samsung Group’s strategic planning, who restructured Samsung Electronics’ telecommunications network division when he headed the digital media business in the early 2000s, industry sources noted.

Choi, who is known for his close relations with Samsung Electronics vice chairman Lee Jay-yong, was previously an executive overseeing the consumer electronics division before his mobile stint.

Samsung’s executive reshuffles come after the company posted its lowest profit in three years in the third quarter. The tech giant’s operating profit fell 60 percent to 4.1 trillion won ($4 billion) in the third quarter of this year, from 10.2 trillion won a year ago.


Group shake-up

With falling profit and no companies to benchmark and target to catch up with and outperform, Samsung Electronics has been struggling to sustain its current business and develop a new one.

“The company has somewhat become its own enemy, now fighting itself after achieving market leadership and gaining too much weight at the same time,” said an industry source.

As The Korea Herald reported in August, Samsung Group has been trying to increase its management efficiency by conducting a string of layoffs and reshuffles, notably at its flagship Samsung Electronics.

The tech giant recently relocated 500 employees from its mobile business division, which includes the Internet of Things, to other departments including consumer electronics.

Samsung is expected to further step up its restructuring drive at the mobile division by reducing 30 percent of its workforce, which will affect some 6,000 employees.

The tech firm’s weak earnings have affected its affiliates such as Samsung SDI and Samsung Electro-Mechanics, which also face restructuring as part of the group’s efforts to realign its units’ key resources and capabilities.

The group restructuring has also been viewed as a preparation for vice chairman Lee Jay-yong and his two sisters to take over the conglomerate from their father Lee Kun-hee, who is recuperating from a heart attack he had six months ago. Samsung SDI acquired Cheil Industries’ IT materials business, while Samsung SDS was recently listed on the stock market, in a move to raise capital for the three siblings to pay their inheritance taxes.

It was said that the heir apparent Jay-yong would not likely to be promoted next month, and that he would remain vice chairman and mainly focus on revitalizing the tech business.

“With chairman Lee Kun-hee still strongly seen as the symbol of Samsung and his health is recovering, it would be hard to see his son get the promotion,” said another industry source.


European reorganization

Samsung Electronics is also planning to streamline its European offices as early as this year, according to sources.

Moving its European headquarters from London to Poland will be a part of the plan.

“Samsung Electronics will complete its restructuring process in the European region by early next year,” said an official close to the matter, declining to be named.

“The Polish office will serve as Samsung’s new regional headquarters, playing a crucial role in executing business strategies there,” the source added.

He refused to give details of the restructuring plan for Samsung’s European business. The company has suspended sales and operations of its PC laptop business in the region as it found it difficult to compete with cheaper Chinese brands.

Another source, however, said Samsung’s efforts to revive its sluggish performance will affect the home appliance and visual display businesses in the region.

After acquiring Amica, a Polish home appliance manufacturer, in 2009, the Korean tech giant has been making use of the local firm’s manufacturing facilities. Samsung also runs a research and development center in Warsaw.

Europe, where Samsung operates a total of 33 offices, showed the second-lowest sales of 16.6 trillion won in the three quarters of this year among five regions, also including America, Asia, Africa and China.

The figure was slightly higher than the 12.2 trillion won in sales the company earned in the Korean market in the same period.

Industry sources said Samsung would likely carry through with a series of layoffs in the company’s sluggish mobile business in countries including China, Brazil, India and Vietnam.

A Samsung spokesperson, however, denied that it was considering relocating its Europe headquarters from London to Poland.

By Park Hyong-ki and Kim Young-won
(hkp@heraldcorp.com) (wone0102@heraldcorp.com)