Only Mobile and Display Perform Well... Disappointing First Half Performance of Samsung Executives

Avoided Overall Deficit but Semiconductor Alone -9 Trillion
Year-End Regular Personnel Changes: Focus on High-Intensity Reform?

In the first half of the year, Samsung Electronics and its affiliates generally recorded lackluster performance. While some businesses performed well, overall results fell short of market expectations. No Tae-moon, President of Samsung Electronics' Mobile Experience (MX) Division, emerged as the key figure who led the success of the Galaxy S23 series and prevented Samsung Electronics from posting losses. Choi Joo-sun, President of Samsung Display, who earned about 1.6 trillion won in operating profit thanks to panels used in the iPhone 15, also received passing marks. However, Han Jong-hee, head of Samsung Electronics' Device Experience (DX) Division, and Kyung Kye-hyun, head of the Device Solutions (DS; semiconductor) Division, delivered disappointing results.

Han Jong-hee, Vice Chairman and CEO of Samsung Electronics DX Division.
[Photo by Samsung Electronics]

Head of the DS Division posted a 9 trillion won loss in the first half. Considering that in the first half of last year, the division earned 18.43 trillion won and accounted for 65% of Samsung Electronics' total operating profit, this was a significant decline. The division recorded a 4.58 trillion won loss in Q1 and a 4.36 trillion won loss in Q2.

Critics point out that the poor performance was not only due to weak market conditions but also Samsung Electronics' misjudgments. Compared to SK Hynix and U.S.-based Micron, which began production cuts in Q4 last year to reduce price declines, Samsung was slower to implement cuts, which increased losses. Even though the division suffered in profitability metrics, it failed to increase market share. Market share fell from 45.1% in Q4 last year to 43.2% in Q1 this year. The foundry (semiconductor contract manufacturing) business also struggled as demand from major set (finished product) customers declined. The gap in market share with the leading Taiwanese company TSMC widened from 40.6 percentage points (p) in Q3 last year to 42.7p in Q4 and 47.7p in Q1 this year.

Kyung Kye-hyun, President and CEO of Samsung Electronics DS Division. [Hwaseong=Photo by Hyunmin Kim kimhyun81@]

Han Jong-hee, who also serves as head of the Video Display (VD) and Home Appliances Division, cannot escape criticism for poor performance. Although the DX Division posted 8.04 trillion won in operating profit in the first half, 86.8% of that came from the MX Division. The contribution from VD and home appliances was only 13.2%. Despite the air conditioner peak season in Q2, the division failed to produce notable results. Han reversed his previous statement that "the OLED TV business will never be pursued," restarting the business after 10 years in an effort to turn around performance, but the results remain to be seen.

The 'premium product' strategy also failed to work. The DS Division used DDR5 and AI-focused HBM semiconductor cards, while the DX Division employed Neo QLED and OLED TV cards, but both divisions could not avoid poor first-half results.

President No Tae-moon, Head of the MX Division, DX Division, Samsung Electronics.
[Photo by Samsung Electronics]

Contrary to the poor performance of the two divisions, No Tae-moon, head of the DX Division's MX Business Unit, demonstrated strong capability by earning 6.89 trillion won in operating profit in the first half, led by the Galaxy S23. Since the end of last year, he has also served as head of the Design Management Center, driving the success of the Galaxy S23. Global smartphone market share rose from 19% in Q4 last year to 22% in Q1 this year, regaining the top spot from Apple.

Choi Juseon, President and CEO of Samsung Display. [Photo by Samsung Display]

Choi Joo-sun, President of Samsung Display, also posted 1.62 trillion won in operating profit in the first half. Despite reduced demand from global smartphone set manufacturers due to high inflation and economic recession, the company overcame the crisis through deliveries such as for the iPhone 15. Samsung Display's market share for iPhone panels is known to be around 60-70%. It maintains a 'super gap' in small and medium-sized panels.

Jang Deok-hyun, President of Samsung Electro-Mechanics, earned 345.1 billion won in operating profit in the first half, down 55.2% from 770.6 billion won in the same period last year. Weak IT demand hampered performance. Samsung Electro-Mechanics plans to secure growth engines by expanding high value-added products such as high-spec MLCCs, flagship phone camera modules, automotive electrical and electronic components, and server parts.

Jang Deok-hyun, President and CEO of Samsung Electro-Mechanics.
[Photo by Samsung Electro-Mechanics]

Most Samsung Electronics business units and affiliates, excluding mobile and display, posted poor first-half results. The disappointing performance was considered too severe to be blamed solely on weak market conditions. The DS Division's 'delayed production cuts' and the VD and home appliances division's 'missed opportunity in the OLED TV business' contributed to the decline.

Due to the poor first-half performance, Samsung Electronics saw a sharp drop in bonuses compared to last year. The DS Division's first-half Target Achievement Incentive (TAI) payout rate was 25%, down by half from 50% last year. The MX and VD divisions had a TAI of 50%, while the home appliances and network divisions had 25%.

Some in the business community speculate that Samsung Electronics will change the organizational atmosphere through strong personnel measures in the year-end regular personnel reshuffle. It is expected that replacements will be made at the division head (CEO) and president levels. If division heads are changed, it will be the first time in two years since the organizational restructuring at the end of 2021. At that time, Samsung merged the IM (wireless) and CE (consumer electronics) divisions into the DX Division. Whether Han will remain head is a matter of intense interest.

Kim Kyung-jun, former Vice Chairman of Deloitte Consulting, said, "Samsung makes money now based on ideas from 30 years ago, plans from 20 years ago, and investments from 10 years ago, but items for 10 or 20 years from now are unclear. The divisions have the potential to generate operating profits of 10 to 20 trillion won whenever the DRAM market recovers, so now the management should consider the year-end personnel reshuffle as the 'last chance' and carry out a strong reorganization."

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