Samsung Electronics Reshuffles
In a not surprising move, Samsung Electronics (005930.KS) Vice Chairman Lee Jae-yong, has decided to streamline Samsung’s operational structure, reducing the primary divisions from three to two and installing two division heads. As can be seen below, the Consumer Electronics division, which was comprised of Samsung’s TV business and its appliance business (excluding Harman) and the IT/Mobile division, which was composed of Samsung’s smartphone and network products businesses.
Those businesses have all been combined into the Set Division, which will be run by the former head of the TV division. The DS (Device Solutions) division (Semiconductors and display) will remain intact but will now be run by Kyung Kye-hyun, who was the head of the company’s flash product business and former head of Samsung Electro-Mechanics (009150.KS), and the Set division will be run by Han Jong-hee who was instrumental in developing Samsung’s TV business, which has been the global leader for 16 years. While no mention of whether Harman (pvt), which was acquired by Samsung in March of 2017 for $8b, will be included in the Set division, we make the assumption that it will. Harman has been broken out in Samsung’s results since the acquisition.
In 3Q, the new Set division would have represented ~52.5% of sales while the Device Solutions division would have represented ~47.4% of sales, however in terms of operating profit, the new Set division would have accounted for ~27% of operating profit, while the Device Solutions division would have accounted for ~73% of operating profit. In the same quarter, the consumer electronics portion of the new Set division would have generated ~5% of the company’s operating profit, while the IM division would have generated ~21% of the company’s operating profit. While both of the new divisions are fairly close in sales, the Device solutions business has been considerably more profitable for Samsung, which likely kept the division intact.
The mandate for the Set division is likely to increase share in the mobile space by reinstating Samsung’s dominance in the premium market (foldables), to build the company’s networking business, which has been gaining ground on the back of Huawei’s (pvt) trade issues, and to capitalize on Samsung’s dominance in the TV space as TV panel prices decline and Samsung continues to broaden its TV technology offerings. While divisional shifts such as these are common in the CE space, the change in leadership is usually the more important factor with considerable pressure on the new CEOs. Each will have their problems to deal with as the COVID-19 pandemic continues to reshuffle the cards, but the ultimate responsibility will come down to Vice Chairman Lee, who was responsible for making the changes and picking the new CEOs.
Those businesses have all been combined into the Set Division, which will be run by the former head of the TV division. The DS (Device Solutions) division (Semiconductors and display) will remain intact but will now be run by Kyung Kye-hyun, who was the head of the company’s flash product business and former head of Samsung Electro-Mechanics (009150.KS), and the Set division will be run by Han Jong-hee who was instrumental in developing Samsung’s TV business, which has been the global leader for 16 years. While no mention of whether Harman (pvt), which was acquired by Samsung in March of 2017 for $8b, will be included in the Set division, we make the assumption that it will. Harman has been broken out in Samsung’s results since the acquisition.
In 3Q, the new Set division would have represented ~52.5% of sales while the Device Solutions division would have represented ~47.4% of sales, however in terms of operating profit, the new Set division would have accounted for ~27% of operating profit, while the Device Solutions division would have accounted for ~73% of operating profit. In the same quarter, the consumer electronics portion of the new Set division would have generated ~5% of the company’s operating profit, while the IM division would have generated ~21% of the company’s operating profit. While both of the new divisions are fairly close in sales, the Device solutions business has been considerably more profitable for Samsung, which likely kept the division intact.
The mandate for the Set division is likely to increase share in the mobile space by reinstating Samsung’s dominance in the premium market (foldables), to build the company’s networking business, which has been gaining ground on the back of Huawei’s (pvt) trade issues, and to capitalize on Samsung’s dominance in the TV space as TV panel prices decline and Samsung continues to broaden its TV technology offerings. While divisional shifts such as these are common in the CE space, the change in leadership is usually the more important factor with considerable pressure on the new CEOs. Each will have their problems to deal with as the COVID-19 pandemic continues to reshuffle the cards, but the ultimate responsibility will come down to Vice Chairman Lee, who was responsible for making the changes and picking the new CEOs.
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