Samsung replaced its CEOs, and reorganized the business again

Looking in a new direction.
Looking in a new direction.
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In its first major shakeup since 2017, Samsung has rejigged its business from three divisions to two, and reshuffled its top brass.

The world’s largest smartphone, television, and semiconductor manufacturer merged its mobile and consumer electronics businesses into a single unit—the SET division. Jong Hee-han, who served as the head of the visual display business, has been promoted to CEO and vice chairman of this new arm. Hee-han, who has been with the company for 15 years and helped grow its TV business, will continue heading the visual display business as well.

The other division, the components business, will be headed by company president Kye-Hyun-kyung. The semiconductor design expert, who led Samsung’s flash product and technology team, will serve as the CEO of Samsung Electro-Mechanics.

The 83-year-old manufacturing conglomerate is streamlining businesses and consolidating management as it tries to obtain pole position in the booming semiconductor market. To win, Samsung must tackle a slew of issues from rising raw material prices to logistics difficulties to growing competition from the US and China. It has a $100 billion cash pile to deploy; it just needs the right guidance to spend it.

Why Samsung is going from three divisions to two

Samsung split its business into three, with a multiple-CEO structure back in 2013.

Then, its smartphone business was faced with a litany of suits from Apple but its consumer electronics unit—think TVs, refrigerators, washing machines—was going from strength to strength. Designating three separate units maintained a clear divide between Samsung’s phones and appliances, and its components business, which sold parts to Apple and other rivals.

But the chip production business now overwhelms the TV and mobile divisions. During the quarter ending Sept. 30, three-quarters of Samsung’s operating profit came from its components division, and its mobile phone business is in sharp decline, owing to stiff competition from Apple, and Chinese rivals Oppo and Vivo in the emerging 5G segment.

Consequently, this overhaul slices the business into just two halves: the semiconductor business, and everything else.

Why Samsung is reorganizing its business now

The reorganization comes just over three months after de facto leader Lee Jae-yong, known as Jay Y. Lee in the west, was released on parole after serving more than half his two-and-a-half-year sentence for bribery.

Pro-business lobbies celebrated the decision to grant Lee parole, but activists argued it was another example of excessive leniency towards corrupt business tycoons. Either ways, one thing is for sure: Samsung can finally start dealing with the “unprecedented crisis” it’s been facing since the man who signs off on major decisions was put behind bars.

“There may be more prompt execution of funds or decision-making,” Kim Sun-woo, an analyst at Meritz Securities, told CNBC.

Already, the company has made some big moves to take on rivals like Taiwan Semiconductor Manufacturing and Intel. It pumped $205 billion into chip and biotech days after Lee walked out of prison. In November, Lee toured the US and Samsung announced that its building a $17 billion chip making factory in Texas. Lee is currently on a trip to the Middle East to win more business, and Europe could be his next stop.