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Samsung Pushes For Drastic Reforms

Samsung Pushes For Drastic Reforms

Samsung Group will undertake a major business restructuring next year aiming to restore sluggish profits at Samsung Electronics and other key affiliates.

Even though the flagship Samsung Electronics has posted improved earnings in recent quarters, the figures are still lower than those during its heyday in 2013. Analysts expect its operating profits to fall again below the 6 trillion won ($5.14 billion) mark in the fourth quarter.

As part of the planned restructuring set to be announced Thursday, the Korean tech giant’s mobile and home appliance business divisions are expected to face a modest overhaul following their leadership change last week. 

Co-CEOs Shin Jong-kyun and Yoon Boo-keun, who had led the respective business units, will step back from daily operations while maintaining their CEO titles. Their younger successors will take over the control to bring a fresh breath into operations.

Amid slowing device sales, the mobile division will make a big push on software under the leadership of new chief Koh Dong-jin, the mastermind behind mobile payment system Samsung Pay and mobile security system KNOX.

“Next year will be tough but the situation is not as dire as it appears,” he told reporters last week. “We plan no drastic changes in the organization.”

The chip-making unit, led by another co-CEO Kwon Oh-hyun, will receive further support to continue its current strong momentum. In the third quarter, operating profits in chip sales soared to 3.66 trillion won, making up almost half the company’s total earnings.

Key to next year’s business restructuring, among other things, are new growth engine businesses such as car parts and biotechnology ― the pet projects of Samsung Electronics vice chairman and the group’s heir apparent Lee Jae-yong.

Just as LG Electronics has set up a separate business division for automotive compartments especially for electric cars, Samsung is also likely to consider a new team for car parts to speed up partnerships with global carmakers.

Samsung’s medical equipment business unit, which is still in its infancy, has already gained a big boost with Jeon Dong-soo, former head of Samsung SDS, joining as new division chief last week.

Samsung Bioepis and Samsung Biologics ― the group’s bio business-related affiliates ― are said to have secured resources from other Samsung companies. Their leadership also received promotions in last week’s executive reshuffle.

Keen attention is also being paid to Samsung C&T, which became the group’s de facto holding company following its highly publicized merger with Cheil Industries last year.

Considering the company’s business portfolio now spans from construction and trading to fashion and resorts, industry sources predicted its businesses could be simplified for better synergies and profitability.

In the meantime, it seems unavoidable that Samsung Engineering and Samsung Heavy Industries, both of which are suffering from profit losses, will face some restructuring.

“Lee Jae-yong has streamlined the group’s sprawling business over the past year, selling off less profitable affiliates,” said an industry source. “He is likely to focus more on elevating efficiency and profitability.”

Reflecting the heir apparent’s practical approach, the group’s Corporate Strategy Office, which played a control tower role in the era of his father, chairman Lee Kun-hee, is also expected to be streamlined while more resources are poured into specific business projects.