In a recent interview, a spokesperson for Samsung Electronics revealed major plans for restructuring its semiconductor business, particularly aiming to streamline leadership in its chip division. According to reports from South Korean media, the company intends to phase out its organic light-emitting diode (OLED) operations to concentrate on core business areas, striving to enhance its competitiveness against industry rivals such as SK Hynix and Micron, especially in the growing market for artificial intelligence (AI) memory chips.
The Korea Economic Daily reported that following a disappointing revenue forecast released earlier this season, Kim Kyung-ki, who took over as Vice Chairman and head of the Device Solutions (DS) division in May, has initiated a company-wide restructuring. Sources indicate that this evaluation might lead to significant cuts in executive positions within the semiconductor unit.
Insiders have also suggested that Samsung Electronics may undergo a substantial personnel shake-up before the end of the year. This could involve replacing technology chiefs and manufacturing heads in three major sectors of the DS division: memory chips, foundry services, and system LSI. Additionally, the company is expected to downsize its foundry operations and reorganize its semiconductor research center.
Furthermore, Pulse News reported that Samsung Electronics is contemplating exiting the LED business altogether. Historically, the company has announced personnel changes between late November and early December, but this year an early announcement is anticipated. To improve collaboration between R&D staff and production teams, Samsung is considering moving its research personnel under the management of semiconductor production facilities, while also adjusting its overall “semiconductor philosophy.” Currently, the R&D organization reports directly to the headquarters.
Through this comprehensive overhaul and reduction of leadership roles, Samsung Electronics aims to identify the underlying causes of its dwindling competitiveness, particularly in the High Bandwidth Memory (HBM) sector.
As of the second quarter, the DS division employed 438 executives, accounting for about 38% of the total 1,164 executives within the company. Notably, the number of executives in the chip unit is significantly higher than the 199 at SK Hynix. Many of Samsung’s chip executives were appointed during the semiconductor boom of 2017-2018, but questions about the division’s competitiveness have loomed without substantial cuts in management.
Industry insiders have indicated that Samsung’s competitiveness in DRAM has plummeted to the point necessitating extensive restructuring. Although Samsung has yet to announce quarterly performance figures, analysts predict that its foundry business may have incurred losses of 1.5 trillion won, as may the logic and system chips division. Meanwhile, the memory chip business is anticipated to report operating profits of around 5.5 trillion won, marking a historic dip below those of SK Hynix, which is projected to have an operating profit of 6.77 trillion won for the same period.
Despite recent struggles, including a stock price below its book value and a lack of strong buying interest from investors, analysts attribute this to the high uncertainty surrounding Samsung’s memory business. Additionally, the gap between Samsung and TSMC in the foundry sector continues to widen.
Goldman Sachs recently lowered its price target for Samsung Electronics by 9.5%, citing expected declines in shipments of DRAM and NAND flash memory chips, along with deteriorating profits from both memory and foundry businesses.
