Samsung Electronics may remove co-CEO J.K. Shin as the head of the company's key mobile division, according to a Wall Street Journal article, a move that would strip him of the co-CEO title.
The report, citing unnamed sources, said Samsung is considering a number of top management changes as it undergoes an annual review period in which executives at the sprawling Samsung Group conglomerate jockey for position. The change would come amid turmoil for Samsung's mobile unit, which has seen its sales and profits drop this year amid intensifying competition from not only Apple (NASDAQ: AAPL) but also Chinese firms Xiaomi, Lenovo, Huawei and others.
The WSJ reported that another co-CEO, B.K. Yoon, who leads Samsung's home-appliance and TV units, could add the mobile unit to his portfolio, which might make sense as Samsung pushes further into the connected home market. The shift would also let Yoon streamline management of the company.
Samsung has a third co-CEO, Kwon Oh-hyun, who manages the company's components unit and has responsibility for the firm's semiconductors and display panel business. According to the report, Kwon may stay in that position, under one scenario being discussed inside the company. However, the decisions are not yet final and might change, the report said.
Samsung declined to comment, according to the WSJ.
"A large-scale leadership change at the mobile division may come," Nomura Holdings analyst Chung Chang Won told Bloomberg. "The top leadership who misstepped in the mobile business will have to pay the price."
Bloomberg also reported that Samsung may shake up its mobile management team, but did not speculate on Shin's fate. Samsung said earlier this month it will cut the number of smartphone models it offers in 2015 by at least 25 percent and as much as a third in a bid to slash costs and boost profits.
Samsung achieved operating-profit margins for its mobile unit of above 15 percent for 10 consecutive quarters, but in the third quarter the Samsung's margins from its mobile and information technology fell to 7 percent, their lowest since 2008.
In addition to fewer new smartphone models, Samsung has said that in 2015 it will focus on "enhancing product competitiveness for each price tier and solidify longer term business fundamentals, in order to secure sustained growth and profitability." Samsung said it will focus on differentiating its products through flexible displays and metal frames. The company is also pushing into the connected home and mobile healthcare. However, analysts say the firm needs to focus on software and not hardware to set itself apart.
"Samsung needs to freshen itself up now, so any major top-level shuffle will revive the tension and change the complacent culture," Oh Sang Woo, an analyst at Leading Investment & Securities, told Bloomberg. "Samsung was slow addressing the new market trend, which allowed smaller players like Xiaomi to kick in. It now needs strong leadership who can take decisive, but timely, action."
According to the Journal, Samsung produced about 20 percent more Galaxy S5 units this year than it did last year for the Galaxy S4, based on a survey of its carrier partners around the world, which were asked to predict demand but who weren't responsible for any unsold devices. As a result, when demand fell below expectations, inventory piled up, forcing Samsung to spend more on marketing to sell the units.
In a striking detail, the report said Samsung sold 40 percent fewer Galaxy S5 smartphones than expected, with about 12 million units sold to consumers in the first three months since April, compared with about 16 million units for the Galaxy S4. Samsung only sold more S5 units than S4 units in one market, the United States, which is the firm's largest.
Notably, the report said that in the U.S., Gregory Lee, the president of Samsung's North America operations, has started consolidating the company's U.S. mobile and consumer electronics subsidiaries and is cutting duplicate jobs. The merger of the two units, which hasn't been announced, will take effect in early 2015, the report said.
For more:
- see these two separate WSJ articles (sub. req.)
- see this Bloomberg article
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