By Song Jung-a in Seoul
Samsung Electronics plans to integrate its struggling flat panel business with its chip division in an effort to boost the profitability of its loss-making display business and improve relationships with global clients.
The world?s largest technology company by sales said on Friday that Kwon Oh-Hyun, head of its semiconductor business, will also take charge of the troubled LCD unit while Chang Won-kie, former head of the LCD division, will move into an advisory role.
The rare mid-year reshuffle reflects Samsung chairman Lee Kun-hee?s determination to overhaul underperforming businesses, with demand for consumer electronics expected to slow in coming months as global economic growth falters. Samsung usually announces organisational changes at the end of the year.
Park Kang-ho, an analyst at Daishin Securities, said the move is clearly a reprimand to the management of the LCD business for poor performance. But ?the division is unlikely to turn around any time soon amid lower-than-expected TV demand,? he said.
Samsung?s flat panel business is expected to record a bigger loss for the second quarter than the Won230bn ($216m) loss posted in the January-March period. The loss at the LCD division drove a 30 per cent drop in Samsung?s first-quarter net profit. The South Korean company recently lost its top spot in the display market to cross-town rival LG Display, which is challenging Samsung with its new 3D TV panels.
Samsung is also set to face stiffer competition from Japanese rivals, which are joining forces to create a national champion display maker. Hitachi is considering joining talks between Sony and Toshiba to merge their small LCD panel businesses into a group that would control a fifth of global supply.
Samsung shares closed 3.5 per cent higher on Friday but have fallen more than 10 per cent this year on earning outlook concerns. The company will unveil second-quarter earnings estimates next week and analysts expect the LCD business to remain in the red as flat panel prices show no signs of a pick-up amid oversupply and slowing LCD TV demand.
The management shake-up is also a response to growing calls from customers for ?Chinese walls? between Samsung?s component business and consumer electronics unit. Clients such as Apple are increasingly uneasy as they are buyers of Samsung components including chips and display panels but also compete with completed Samsung products such as mobile phones, TVs and other electronics gadgets.
The need to simplify the complex business structure has become more pressing with Samsung locked in a legal battle with Apple over patents related to its smartphones and tablet PCs. Apple fears its component orders risk revealing too much to Samsung about its product plans, an issue it has repeatedly raised with Samsung executives.
However, the reshuffle is unlikely to result in big changes in Samsung?s business practices, said Mr Park, and ?customer worries about such problems will likely persist.?
? The Financial Times Limited 2011