Samsung Repositioned With `Market Rule
By Kim Yoo-chul
Staff Reporter
Samsung Electronics is attempting to become a leader of ``digital convergence’’ in the global electronics market by slashing staggering business units through massive reorganizing steps.
Industry experts still doubt whether the large-scale combination will create as significant synergy as the Korean electronics giant hopes, citing the meager contribution of its home appliance and PC businesses. But they say Samsung has secured a springboard to jump into such a global trend.
``The reorganization is not bad for Samsung as the company has better positioned itself to respond in this era of digital convergence by using core mobile technologies that its telecommunications division owns,’’ a local analyst said Friday.
``What seems interesting is that Samsung has followed a `market rule.’ Performances of its home appliances and PCs, as well as MP3 players, have stagnated over the past few years due to lower brand images. In terms of efficiency, the latest decision seems to be good,’’ another local analyst said.
Under the reorganization, Samsung’s home appliance division, which makes freezers, air-conditioners and washing machines, will be combined with its digital media segment, which is responsible for TV sets and monitors.
Within the digital media division, Samsung’s new-target Blu-ray player business, in addition to home theaters, will be merged with its TV section.
Further, its MP3, notebook PC and set-top box businesses will be transferred to its telecommunication division led by Choi Gee-sung.
Home Appliances Lack Competitiveness
Unlike the moves of its cross-town rival, LG Electronics, Samsung’s home appliance division has virtually failed to increase global shares in recent years due to its hesitancy in allocating more cash for the development of core technologies.
Industry sources say LG Electronics was spending some 5 percent of total sales solely on research and development (R&D) to secure distinguished motor and compressor technologies that are applied to freezers, air-conditioners and washers.
Samsung’s R&D budget for home appliances was known to be less than 1 percent of its total sales, distracted by a greater focus on memory-implemented and flat-screen TV businesses, according to Samsung insiders.
Samsung was also behind LG in terms of price competitiveness. Since 2000, LG has moved 70 percent of its manufacturing lines to China, Mexico, India and Brazil. Sources say Samsung produces a washer and air-conditioner every 18 seconds, in comparison to 10 seconds for LG and 13 seconds for Electrolux.
``Samsung has been very aggressive in marketing, however, its main home appliance products line-up was mid-end, resulting in profitability being dragged down,’’ an official from Samsung Electronics said.
Samsung’s home appliance division reaped some 3.5 trillion won in sales on a consolidated basis last year, while that of LG’s reached 11.8 trillion won over the same period.
Bigger Hope for Telecommunication Division
Samsung said the Blu-ray and camcorder business is to be led by the video display business unit. The set-top box and MP3 player businesses will be under the direction of the telecommunication division.
``Samsung needs to implement detailed measures in order to face off growing global competition in the MP3 market as Apple and SanDisk are reportedly preparing to launch new MP3 players by applying cutting-edge technologies such as wireless Internet,’’ according to Samsung sources.
``The MP3 player business is expected to grow when coupled with leading mobile technologies that the telecommunication division boasts,’’ the sources said, adding that set-top box units could become more competitive amid signs of a convergence between broadcasting and telecommunications capitalizing on the faster penetration of IPTVs.
Experts say notebook PCs and printing businesses must break down barriers and be armed with technology competitiveness and either streamline or hire new staff.
According to data from Gartner, a market research firm, Samsung’s global PC market share was a meager 2 percent in the first quarter of this year. Hewlett-Packard was found to lead the market with 21.5 percent.
Samsung’s printer business achieved some $2.5 billion in sales last year globally, out of an overall worldwide market of $130 billion for the same period.
``Appointing Choi Chi-hun, a former executive of General Electric, as the new head of our digital-printing division shows our zeal to nurture the global business-to-business printing market,’’ a Samsung spokesperson Lee Seung-han said, adding the flat-screen TV and memory chip market was $100 billion and $60 billion, respectively, in 2007.