Posted : 2016-01-28 17:22
Updated : 2016-01-28 22:39

Samsung to create finance holding firm

Samsung Electronics headquarters in Seocho-dong, southern Seoul. The company expressed caution for this year's outlook. / Yonhap

Electronics affiliate remains cautious about biz outlook

By Kim Yoo-chul

The Samsung Life Insurance building in Jung-gu, central Seoul
/ Korea Times photo by Hong In-ki
Samsung Group is accelerating efforts to set up a financial holding company after Samsung Life Insurance acquired a 37.4 percent stake in its credit card affiliate.

Samsung Life, Korea's No. 1 life insurer, said Thursday that it purchased 43.3 million shares in Samsung Card from Samsung Electronics for 1.5 trillion won. The takeover price was 35,500 won per share.

The acquisition has made Samsung Life the largest shareholder of Samsung Card with its stake increasing to 71.8 percent.

This is expected to clear the way for the life insurer to emerge as a financial holding firm of the nation's largest family-run conglomerate, or chaebol.

The takeover came right after Samsung Electronics approved the deal in a board of directors meeting early in the day.

"The deal was intended to maximize synergy between Samsung Life and Samsung Card in the finance segment," said a manager at the Samsung Corporate Strategy Office after the financial market closed.

The move is in line with Samsung Electronics Vice Chairman Lee Jae-yong's drive to streamline the ownership structure and reorganize the group affiliates by selling non-core business affiliates and consolidating core units to enhance productivity, efficiency and profitability.

"Samsung is helping Vice Chairman Lee get greater control over the conglomerate," said a Samsung director.

The latest share deal came after Samsung Electronics posted 6.14 trillion won in operating profit in the last quarter, up 16.2 percent from a year earlier.

Net profit fell 39.7 percent to 3.22 trillion won on weak demand for premium smartphones and weaker chip prices, it said early Thursday. Its quarterly sales came in at 53.32 trillion won, up 1 percent.

For the full year, it posted 200.6 trillion won in sales, down 3 percent, and 26.4 trillion won in operating profit, up 5.5 percent.

It expressed caution for this year's outlook.

"The business outlook for this year isn't good because weak IT demand may make it difficult to maintain this year's profits at the level of the previous year," Samsung said in a statement.

The company added it will focus more on profitable logic chips, premium mobile DRAMs with expanded memory capacity and small- and medium-sized organic light-emitting diode (OLED) displays.

But the financial market paid more attention to the ending of profit growth on a quarterly basis as Samsung failed to continue its winning streak for the first time in five quarters.

Shares of Samsung Electronics closed at 1,145,000 won on the Seoul bourse, Thursday, down 2.55 percent from the previous trading session.

During a conference call to analysts and investors, the firm said it will boost the output of advanced computer memory chips such as mobile DRAMs and logic chips with finer processing technology.

"Samsung will expand the use of advanced computer memory chips in a strategy to offset growing concerns over corporate profitability in the financial market. Samsung's top priority is to sell more chips to be used in corporate servers," the company said.

Its component unit was the biggest profit source last year. Out of the 26.41 trillion won that Samsung earned as operating profit in 2015, its component unit created 14.89 trillion won, taking up 56 percent.

Samsung is the global leader in memory chips. Usually, its entire corporate profit structure is dependent upon moves of its components business.

Samsung expects growing demand for the DDR4, which will be used to develop chips to be used in wearable devices and vehicles.

"For data-intensive devices, Samsung is paying attention to NAND flash memory chips for solid state drives (SSD)," the company said.

In handsets in which Samsung is fiercely competing with its bitter long-time rival Apple, the company will release cheaper phones.

"Samsung will try to sell more budget handsets. Also, we hope this year will see more penetration of our mobile payment system ― Samsung Pay ― to customers in international markets," it said.

In OLEDs, which Samsung was hesitant to jump into, unlike its local rival LG Display, it hinted at advancing into the large-sized OLED market.

"Our focus is small-sized OLEDs for smartphones. But we will proceed with projects for the development of large-sized OLED displays for more applications. We are also on the way to develop devices with flexible OLED displays; but the exact timing for such products will be dependent upon talks with our clients," the company said.

  • 1. Arrest warrant requested for Samsung chief in corruption scandal
  • 2. 'Stop wiring money illegally'
  • 3. Moon, Ban begin race for presidency
  • 4. Korean language becomes college entrance exam subject in France
  • 5. Samsung chief's arrest to be decided on 'Sunday or later': independent counsel
  • 6. US eggs to go on sale this weekend
  • 7. K-pop's HyunA tunes up for North American tour
  • 8. Counsel mulls Samsung chief's arrest
  • 9. Foreign minister pressured to resign for statue remark
  • 10. Whistleblower of Choi Soon-sil scandal unaccounted for