‘Lowest Price’ Samsung Electronics Enters Emergency Management... Business Community Revises Corporate Strategies (Comprehensive)

Companies' Crisis Awareness Increases: Relay Meetings to Develop Response Plans

[Asia Economy Reporters Sunmi Park, Chaeseok Moon, Minyoung Cha] "International affairs, industrial environment, and global market conditions are rapidly changing." (Remarks by Han Jong-hee, Vice Chairman of Samsung Electronics, at the Samsung Presidents' Meeting on the 20th)

Domestic conglomerates including Samsung Electronics are revising their business strategies in response to the rapidly changing global economy and market environment. The intensification of the US-China trade war, the deepening supply chain instability caused by the Russia-Ukraine war, the demand slowdown that could be triggered by severe inflation, and the looming global economic recession?the so-called ‘fear of R’?are expected to cause greater and more prolonged damage to companies than anticipated.

Business Community Responds to Crisis

According to the business community on the 21st, companies are currently holding ‘relay’ strategy meetings to read the flow of change with a long-term perspective and to prepare new growth engines to build capabilities that can lead the future.

Samsung, following the presidents' meeting of electronics and electronics affiliates held the previous day, plans to review its mid- to long-term technology roadmap for developing new technologies that can lead the future through the global strategy meeting starting on this day, and to establish and implement concrete action plans. This is driven by a sense of crisis that strategies must be promptly prepared to respond to the uncertainty of the management environment. LG Electronics, which is more negatively affected by inflation compared to IT component companies, is conducting a month-long strategy briefing amid concerns that its operating profit margin in the second quarter will turn negative compared to the previous quarter and the same period last year. It is working on measures to overcome deteriorating profitability caused by rising oil prices, increased global logistics costs, and weakened consumer sentiment.

SK Group, led by Chairman Chey Tae-won, has begun preparing bold management activities that can break away from the current business model. Hyundai Motor Group Chairman Chung Eui-sun plans to convene a global regional headquarters meeting from next month to forecast the business environment for the second half of the year and to take strategic responses accordingly. Since 2019, Chairman Chung has only received reports on regional issues and conveyed requests, so his direct attendance at the meeting signifies the urgency of responding to various crises such as rising raw material prices and the shortage of automotive semiconductors.

Although companies have simultaneously begun reviewing survival strategies to overcome the worsening business environment, concerns remain that finding a breakthrough will not be easy. This is because the shocks from soaring interest rates and exchange rates are expected to be fully reflected in corporate management in the second half, and uncertainty has peaked due to soaring raw material prices and labor costs.

Samsung Holds Successive Executive Response Meetings

Samsung Electronics, which has fallen below the 60,000 won level in the stock market and is called the ‘crisis 50,000 won Samsung,’ has effectively entered an emergency management system and is holding successive response meetings. On the 20th, the first working day after Vice Chairman Lee Jae-yong returned from his European business trip from the 7th to the 18th, an emergency presidents' meeting was held with 25 executives from Samsung Electronics and its electronics affiliates. From the 21st, the DX (Device Experience) division, responsible for IT, mobile, and consumer electronics, will hold a first-half strategy meeting, followed by the DS (Device Solutions) division, responsible for semiconductors, from the 27th to the 29th.

This is the first official Samsung presidents' meeting in three years since 2019. Although Vice Chairman Lee did not attend in person, the meeting was urgently convened right after he emphasized the supply chain crisis caused by the Russia-Ukraine war, market confusion, rapid technological changes in the industry, and the importance of advanced technologies such as semiconductors and batteries during his trip. The meeting focused intensively on sharing the executives’ awareness of the crisis and investment responses to future technologies. It is widely viewed that Samsung has recognized the crisis and has started management aimed at developing and securing future technologies.

The meeting was chaired by Vice Chairman Han Jong-hee and President Kyung Kye-hyun, with 25 executives from electronics affiliates including President Choi Yoon-ho of Samsung SDI, President Hwang Sung-woo of Samsung SDS, President Choi Joo-sun of Samsung Display, and President Jang Deok-hyun of Samsung Electro-Mechanics attending. The ‘marathon meeting’ lasted over eight hours. The presidents reviewed global risk factors such as inflation, supply chain shocks, and sharp declines in IT product demand that Samsung faces, and broadly discussed countermeasures including next-generation technology development and strengthening supply chain stability. In particular, the presidents devoted much time to discussions related to ‘next-generation technology development.’

The discussions of the presidents will be passed on to the Samsung Electronics global strategy meetings held by each business division starting from this day. About 240 people, including headquarters executives and overseas branch heads (around 140 from DX and 100 from DS), are expected to participate both online and offline. In the DX division, which faces sales impacts on home appliances and mobile products due to supply chain disruptions and economic recession and flexible operation of production lines, issues and response strategies of global branches are likely to be discussed.

In particular, the MX division, which oversees the smartphone business, is expected to focus on internal risk assessments and final preparations for the launch of strategic smartphones in the second half. The DS division, a core area emphasizing ‘technological capability,’ is expected to review and forecast the changed semiconductor market in the second half and check the progress of facility investments at the second foundry in Taylor, Texas, and the third plant at the Pyeongtaek campus.

Falling to ‘50,000 Won Samsung’... Clouded Future Outlook

Samsung’s crisis is clearly reflected in the stock market. After falling to the 50,000 won level on the 17th, it has been hitting 52-week lows day after day. On the previous day, Samsung Electronics briefly dropped to 58,100 won during trading and closed at around 58,500 won on the day.

Investors diagnose that negative factors such as the delay in the launch of Intel’s next-generation server CPU ‘Sapphire Rapids’ have overlapped amid growing concerns about a global economic recession. Especially, since factors that could negatively affect Samsung Electronics’ business performance, such as decreased sales of set products and worsening semiconductor supply, are seen as influencing the stock price decline, expectations for second-half earnings are also low.

Neogeun Chang, a semiconductor expert and head of the Hyundai Motor Securities Research Center, lowered Samsung Electronics’ six-month target stock price from 91,000 won to 82,500 won and this year’s operating profit forecast from 63.346 trillion won to 58.708 trillion won on the same day. He said, "The current semiconductor equipment supply shortage is severe, and it will be difficult to resolve the supply shortage even after the second quarter."

There is also a forecast that Samsung’s foundry market share, competing with Taiwan’s TSMC, will recover only in the second half of next year. Youngwoo Kim, a researcher at SK Securities, said about Samsung Electronics’ non-memory business, LSI and foundry division, "Due to the sluggish 3-nanometer GAE process, TSMC’s market share will rise until the first half of next year, and Samsung Electronics’ market share will recover only in the second half of next year."

This content was produced with the assistance of AI translation services.