SEOUL (Reuters) – Samsung Electronics Co Ltd will merge its mobile and consumer electronics divisions, the firm said on Tuesday, naming new co-chief executives in the biggest reshuffle since 2017 to simplify its structure and focus on the logic chip business.
Two co-chief executives, instead of three, will lead the South Korean firm as it pivots on the two business pillars of chips and consumer devices, including smartphones, to help lead the next phase of growth and boost competitiveness.
Samsung, whose Galaxy flagship brand helped it become the world’s biggest smartphone maker by volume, is seeking to revive slowing mobile growth, whose profit contribution shrank to 21% last quarter from nearly 70% at its peak in early 2010s.
Instead, its component business, led by chips, has become the most profitable, helped by a boom in data storage and a recent shortage of global semiconductor supplies.
The business generated nearly three-quarters of Samsung’s 15.8 trillion won ($13.4 billion) operating profit last quarter.
Samsung said Han Jong-hee, the head of visual display business, will become a co-CEO, leading the newly merged division spanning mobile and consumer electronics as well as continuing to lead the television business.
Han has risen through the ranks in Samsung’s visual display business, without experience in mobile.
It is not immediately clear what changes or divisions of labour were expected under Han, but analysts said the reshuffle could help Samsung tackle challenges such as offering seamlessly connected services between its smartphones and home appliances.
“In the long term, the biggest challenge is forming a platform of Samsung’s own,” said Lee Jae-yun, an analyst at Yuanta Securities Korea.
“Those businesses have to keep increasing connectivity between devices, but so far it hasn’t been able to create a lasting platform with presence.”
More immediate problems are a shortage of chip supplies, rising raw material prices, logistics difficulties, and competition from Apple Inc and Chinese rivals amid concerns about a slowing mobile market, analysts said.
Kyung Kye-hyun, chief executive of component affiliate Samsung Electro-Mechanics and a former head of the flash memory chip and technology team, was named co-CEO to lead the chip and components division.
Other high-profile promotions included naming as vice chairman Chung Hyun-ho, the head of a “task force” that analysts said co-ordinates decision-making in Samsung Electronics and affiliates, and which media have said works closely with Lee.
The re-organisation is the latest sign of centralised change at Samsung after Vice Chairman Jay Y. Lee was paroled https://www.reuters.com/world/asia-pacific/samsung-leader-jay-y-lee-released-prison-parole-2021-08-13 in August after a bribery conviction.
“There may be more prompt execution of funds or decision-making,” said Kim Sun-woo, an analyst at Meritz Securities.
Samsung Electronics last named new division heads in late 2017.
The group is focusing on areas from semiconductors, artificial intelligence and robotics to biopharmaceuticals, with plans to invest 240 trillion won ($206 billion) in these areas over the next three years.
Group flagship Samsung Electronics aims to overtake TSMC to become No. 1 in chip contract manufacturing by 2030 by investing about $150 billion in logic chip businesses, including foundries.
Late last month, Samsung chose the U.S. city of Taylor in Texas for a planned $17-billion chip plant after months of deliberation, coinciding with Lee’s first business trip to the United States in five years.
Shares of Samsung Electronics rose 1.6%, outperforming a rise of 0.4% in the benchmark index.
(Reporting by Joyce Lee; Editing by Miyoung Kim and Clarence Fernandez)