Samsung may restructure display, mobile units

By Kim Yoo-chul

Samsung Electronics plans to reduce its mobile and display businesses as the global technology leader is seeking for growth not quantity-focused growth, said people familiar with the issue, last week.

They say the consumer electronics firm plans to seek profits over expansion. They cite Vice Chairman Kwon Oh-hyun’s messages who said on the company’s anniversary, “Samsung’s TV and mobile businesses are losing luster.”

“There is heated debate for a realignment of Samsung’s electronics businesses. Samsung’s tech units may be integrated, if necessary, for a leaner structure or to cut costs. But when you think about mobile and display businesses, the company will restructure them,” a source said over the phone.

For smartphones, Samsung’s top management reached a consensus not to compete for “volume growth” as the market has a new order due to the rapid rise of cheaper phones.

“The contribution of Samsung’s mobile unit to entire profits will be reduced. As Samsung wants to secure its own business territory, the company will maintain its global share by selling more budget phones and having flexibility in production rates at its local and overseas factories,” he said.

Samsung Electronics was the world’s top smartphone maker last year. Its position; however, isn’t that strong as it was a few years ago. Its key Vietnam plants are on track to cut production rates to inventories and save costs.

For the third quarter of this year, Samsung’s mobile unit reported shipment growth in phones but noted that its “profitability declined” due to the fire sale pricing incurred to boost sales of its disappointing Galaxy S6, along with a lower handset average selling price (ASP) due to increased sales of mid- to low-end products.

Meanwhile, Samsung is also considering restructuring its display business to focus more on organic light-emitting diode (OLED) panels rather than LCD ones.

“As Kwon asked for radical change for sustainability, expanding the OLED business will be one option for Samsung Display,” another source said.

“There has been a lot of talk on which part of Samsung Display will be impacted the most. Some say, the company may sell its LCD business to a Chinese company; although that is just a rumor for the time being. However, reducing LCD business does make sense due to weak demand,” he said.

No merger?

Samsung’s top management officially says there will be no massive shake-ups at its technology units after the conglomerate sold all its chemical businesses to Lotte Group.

“It’s a groundless that Samsung Electronics will merge with Samsung Display,” Kim Jong-jung, president of the Samsung Future Strategy Office, told reporters, recently, adding that talk about a merger between Samsung SDI and Samsung Electro-Mechanics were also not true.

People have said that as Samsung SDI -- a battery and electric materials business -- sold its chemical division, a merger with Samsung Electro-Mechanics, the component unit, would bring about a vertically-integrated structure.

“For the time being, Samsung Electronics has no plan to merge with Samsung SDS. But a merger between group affiliates will possibly be coming only if it has an impact on shareholders and creates synergy,” said Robert Yi, head of Samsung Electronics investor relations team.

Samsung Electronics Vice Chairman Lee Jae-yong holds 11.25 percent of Samsung SDS.

“If Samsung C&T, a new unit after the combination with Cheil Industries, wants takes a role as a de facto holding company for the conglomerate, it needs to find platforms for growth. On that front, there are strong possibilities that Samsung C&T will merge with Samsung SDS,” said Lee Sang-hun, an analyst at Hi Investment.

SDS is an IT systems unit of Samsung.

Samsung identified the Internet of Things and FinTech as two of its new growth engines. “C&T’s growth will be driven by Samsung Electronics’ role in hardware, and the software role by Samsung SDS,” said the analyst, adding Samsung will be separated into holding and investment arms.