Samsung merges mobile phone and consumer electronics divisions

Samsung Electronics Co. Ltd. will merge its mobile and consumer electronics businesses, the company announced on Tuesday, and named new co-bosses in the largest restructuring since 2017 to simplify its structure and focus on the logic chip business.

Two instead of three co-bosses will lead the South Korean company, which focuses on the two business areas of chips and consumer electronics, including smartphones, in order to initiate the next phase of growth and increase competitiveness.

Samsung, whose flagship brand Galaxy helped the company become the world's largest smartphone maker, is trying to reinstate slowing growth in the cellphone space, whose earnings contribution slumped to 21% in the last quarter, down from almost nearly in the early 2010s 70% was.

Instead, the components business, led by chips, has become the most profitable business, aided by a boom in data storage and a recent shortage of global semiconductor supplies.

The division generated nearly three-quarters of Samsung's operating profit of 15.8 trillion won ($ 13.4 billion) in the most recent quarter.

Samsung announced that Han Jong-hee, head of the Visual Display business unit, will be named co-CEO, who will lead the newly merged mobile and consumer electronics division and will continue to lead the television business.

Han moved up in Samsung's visual display division but has no experience in the cellular space.

It's not immediately clear what changes or division of labor to expect among Han, but analysts said the reshuffle could help Samsung address challenges such as offering seamlessly connected services between its smartphones and home appliances.

"In the long term, the biggest challenge is to create its own platform for Samsung," said Lee Jae-yun, an analyst at Yuanta Securities Korea.

"These companies need to expand the connectivity between the devices, but so far they have not been able to create a permanent platform with presence."

More immediate problems include a lack of chip supplies, rising raw material prices, logistical difficulties and competition from Apple Inc. (AAPL.O) and Chinese competitors amid concerns about a slowing wireless market, the analysts said.

FAST DECISION MAKING

Kyung Kye-hyun, chief executive of components subsidiary Samsung Electro-Mechanics (009150.KS) and former head of the flash memory chip and technology team, has been named co-CEO to lead the chip and component division.

Other high profile promotions included the appointment of Chung Hyun-ho as vice chairman of the board, who heads a "task force" that analysts say coordinates decision-making at Samsung Electronics and its affiliates and works closely with Lee, according to media reports.

The restructuring is the latest sign of centralized change at Samsung after vice chairman Jay Y. Lee was paroled in August after being convicted of bribery.

"There could be faster execution of funds or decisions," said Kim Sun-woo, an analyst with Meritz Securities.

Samsung Electronics last appointed new divisional heads at the end of 2017.

The group focuses on areas from semiconductors, artificial intelligence and robotics to biopharmaceuticals and plans to invest 240 trillion won ($ 206 billion) in these areas over the next three years.

The group's flagship Samsung Electronics aims to overtake TSMC (2330.TW) and become # 1 in contract manufacturing of chips by 2030 by investing around $ 150 billion in logic chip businesses, including foundries.

At the end of last month, after months of deliberation, Samsung decided on the US city of Taylor, Texas, as the location for a planned 17 billion dollar chip factory, coinciding with Lee's first business trip to the United States in five years.

Samsung Electronics shares rose 1.6%, outperforming the benchmark index (.KS11) by 0.4%.

($ 1 = 1,176.7300 won)