Samsung Electronics conducts reshuffle

By Kim Yoo-chul

Desperate for a breakthrough in its stagnant semiconductor and liquid crystal display (LCD) businesses, Samsung Electronics moved to combine the two divisions into a single unit that is to be led by its chip boss.

It remains to be seen whether the reorganization will be enough to jolt Samsung’s components business and even Kwon Oh-hyun, the head of the newly-created ``device solutions’’ division, admitted that he faces an uphill battle, especially in flat screens.

Industry sources say that Samsung’s retooling may also be part of its efforts to repair its deteriorating relationship with Apple, which has sued its Korean rival for copying the look and feel of iPhones and iPads in its own smartphones and touch-screen tablet devices.

To Samsung, which boasts dual strength in parts and finished products, Apple has been a keen rival in mobile devices but an odd bedfellow in components, being one of its largest clients for flash-memory chips and LCDs.

Samsung officials have been concerned over the possibility of the legal dispute affecting Apple’s appetite for its parts.

It’s worth noting that Apple’s legal action on Samsung comes as the company looks to further diversify its clients for chips and screens.

Although declining to comment on Apple specifically, a Samsung spokesman admitted that the reorganization will massage the egos of clients, which have suspected Samsung’s chip and screen units of providing information to finished products divisions on the parts they use in their products.

Combining the chip and screen divisions and giving the new unit more autonomy will help soothe the trust issue, said the Samsung official.

Kwon rather prefers to talk only about chips and screens.

``We are no doubt tackling difficulties in our LCD business. But we have no intentions to back off from this business,’’ Kwon told The Korea Times after his promotion was announced on Friday although declining to comment on the company’s relationship with Apple.

More changes are ahead personnel-wise, according to Samsung sources, as a number of executives at the flat-screen unit could take the hit for the division’s poor performance.

Chang Won-kie, who had headed Samsung’s LCD division, has now been moved to an advisory role to complement Kwon, drifting away from the main decision-making line.

``I will continue to work through the weekend to assess the challenges that our LCD division faces and contribute to the discussion for finding the right counter measures,’’ Kwon said.

Kwon declined to comment on the possibility of the newly-launched parts unit absorbing Samsung Mobile Display which develops organic light-emitting diode (OLED) displays and other advanced displays.

Samsung is the world’s second largest maker of LCDs, memory chips and flat-screen TVs and the No. 2 mobile handset vendor behind Nokia.

The company is bracing for a dismal second-quarter performance due to evaporating profits in its LCD business.

Spending on chips to continue

Kwon wasn’t so upbeat about chips either, forecasting flattening demand through the end of the year while stressing that the company will continue to invest significantly to improve production technology and capacity.

``With the ‘back-to-school’ season approaching, the burden on heavy inventories could ease, but not to a degree that will allow us to raise our expectations significantly,’’ he said.

The chip market swings dramatically by seasonal factors that determine sales in devices like smartphones, computers and TVs.

``It is common sense that the chip industry reaches its peak during the second half from the first half. However, this year looks like an exception,’’ said Kwon.

Samsung Electronics plans to invest 10.3 trillion won in chips, including 6 trillion won alone for system memory chips ― devices that will be used to control entire computing systems, which is highly profitable.

``Samsung will report better performances in chips than our rivals,’’ according to the executive. He added that the plan to build $3.6 billion chip facility in Austin, Texas, will proceed as scheduled.

When asked about detailed plans for tech leadership in chips, the executive said, ``Samsung will churn out an ultra-thin chips that use the 20-nanometer processing technology from the third quarter of this year.’’

Samsung’s LCD and semiconductor operations last year accounted for 44 percent of Samsung’s revenue and 70 percent of its operating profits.

Samsung’s component business has been in a cyclical downturn, losing money in the first quarter and will likely in the second, according to company officials.