By Kim Yoo-chul
Samsung Electronics reduced its budget for R&D projects last year in accordance with the group-wide strategy to cut fixed costs amid growing market uncertainty.
According to its annual business report, the world’s biggest smartphone manufacturer spent 14.8 trillion won on R&D projects, down 500 billion won from a year earlier.
This was the first time Samsung reduced its annual R&D budget in 16 years.
The company said the downturn in its R&D budget doesn’t necessarily mean that its future business projects will be put on hold, as the company’s annual R&D spending is flexible.
“Samsung still views the current difficulties as a chance to upgrade R&D and increase hiring,” said an official.
According to the report, the firm spent 1.59 trillion won on R&D projects in 1999, down 4 percent from the previous year. Its R&D spending exceeded 3 trillion won in 2003 and rose further to 6 trillion won in 2007.
By 2011 it reached 10 trillion won and rose to 15.4 trillion won in 2014, the company said.
But Samsung is apparently preparing for the “worst case” scenario as all of its key businesses, from smartphones and home appliances to TVs and displays, are increasingly being challenged by the rapid rise of Chinese rivals, threatening its bottom line.
The company report said it had 96,898 employees in Korea last year, down from 99,382 in 2014.
Samsung also slashed the number of executives to save costs. By last year, it had 1,087 executives, an 8.3 percent cut.
The average age of retirement for executives was 55, while that of newly promoted executives was 48, meaning the younger generation emerged at the front of the ongoing transitional moves by Samsung.
The number of company-own research labs was also decreased as a result of its restructuring move.
Its two laboratories in Dallas and San Jose were integrated into Samsung Research America.
Samsung has also combined the function of its LCD and OLED research labs into one.
The company dismantled its electric materials laboratory as it exited the chemical business by selling all related assets to Hanwha Group.
“A rigorous portfolio approach to managing R&D projects helps senior executives focus on strategically promising efforts while uncovering moribund zombie projects that may otherwise go undermanaged, or even unnoticed,” said a recent analysis by McKinsey, an international consultancy. “Widespread layoffs and industry restructuring, though painful, offer opportunities too.”