Home Appliance Woes Mount, Yet 45 Trillion Won in Bonuses? Samsung's Risky Asymmetry [Why&Next]

Amid aggressive competition from Chinese home appliance manufacturers, the burden of U.S. tariffs, and the aftermath of the Middle East war, a sense of crisis is heightening in the domestic home appliance industry. As the decline in profitability became structurally entrenched, Samsung Electronics has resorted to a bold move of restructuring its domestic and global business operations. The company is undertaking an all-out cost reduction drive, including downsizing certain domestic production lines, discontinuing home appliance and TV sales in China where competitiveness has weakened, and implementing workforce restructuring.

Yonhap News Agency

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According to the home appliance industry on April 29, the Digital Appliances (DA) division, which oversees Samsung Electronics’ home appliance business, recently held a management briefing for executives and employees and announced its plan to restructure the business. The plan includes shutting down production lines for certain appliances such as dishwashers and microwave ovens, and shifting to outsourcing production. The company has also decided to close its Malaysia factory, which has served as a core base for overseas appliance production since its establishment in 1989, for the past 37 years.

In addition, Samsung Electronics is pushing ahead with overseas business restructuring. The company plans to finalize its China business restructuring plan this week and announce it to local business sites and partners. The main strategy is to halt sales of home appliance and TV products in China within the year, and instead focus on advanced industry sectors such as mobile devices, semiconductors, and medical equipment. However, the appliance factory in Suzhou will be maintained as a production hub for export products.

The reason behind Samsung Electronics’ large-scale restructuring is the continued deterioration in profitability of its home appliance business. Recently, Chinese home appliance manufacturers have rapidly grown, dominating the low-priced product market based on overwhelming price competitiveness, and are now encroaching on the premium segment with OLED (organic light emitting diode) TVs and AI-powered appliances, threatening the position of domestic companies.

Chinese home appliance makers have expanded their presence in the global market since the early 2010s, fueled by government subsidies and the expansion of the domestic market. Major players such as Haier, Hisense, and TCL initially seized emerging markets through aggressive pricing, and from the mid-to-late 2010s, enhanced their technological capabilities and brand competitiveness to make a full-fledged entry into the premium market. As a result, in sectors like TVs and home appliances where Korean companies have traditionally excelled, price competition and market share pressures have intensified simultaneously. Industry insiders believe that from around 2017-2018, Chinese firms emerged as serious competitors, posing a direct threat to the Korean home appliance industry.

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The profitability of the Device eXperience (DX) division, which includes the DA division, has been declining since the 2020s. This is when the impact on profitability from Chinese competition became fully apparent. An analysis of Samsung Electronics’ annual business reports over the past decade shows that the operating margin of the DX division entered single digits at 7% in 2022, then declined further to 8.46% in 2023, 7.11% in 2024, and 6.84% in 2025. Despite an increase in sales volume driven by flagship products such as the Galaxy S25, actual profitability declined due to intensified cutthroat competition with Chinese firms, higher raw material costs resulting from the Iran war, and a rise in memory prices.

The background for restructuring is also evident in the recent sales trend of SCIC, Samsung’s sales subsidiary for set products in China. In 2015, the sales revenue of the Chinese sales subsidiary was 11.5 trillion won, and 8.8 trillion won in 2016, but it has steadily decreased, falling into the 2 trillion won range from 2020 onward.

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When asked about rumors of a withdrawal from Chinese business sites, Yong Seokwoo, President and head of Samsung Electronics’ Visual Display (VD) division, stated at ‘The First Look Seoul 2026’ event on April 15, “It is true that the business environment in China is challenging.” In addition, ongoing uncertainties surrounding U.S. tariff policies since last year, as well as rising raw material prices due to the Iran war, are further squeezing the profit structure.

With the crisis mounting, signs of workforce restructuring in the home appliance sector have recently surfaced. According to industry sources, Samsung Electronics’ DX division recently implemented voluntary retirement for select employees. Managers born before 1971 are reportedly the main targets, and those who apply for early retirement are expected to receive compensation amounting to several hundred million won. In response, Samsung Electronics explained, “In the past, company-wide voluntary retirement was carried out, but recently, we have been regularly accepting retirement applications from senior employees.”

Although Samsung Electronics achieved record-breaking results on a provisional basis in the first quarter, most of this performance was driven by the Device Solutions (DS) division, and the operating profit of the DX division, which was around 4 trillion won in the first quarter last year, is expected to fall to around 2 trillion won. As a result, the company is maintaining or strengthening its emergency management stance in preparation for the second quarter and beyond. Since last month, the DX division has adopted austerity measures, including reducing overseas business travel expenses, such as limiting executive air travel.

LG Electronics has also entered emergency management mode as the prolonged Iran war and tariff burdens continue. The company has reduced expenses for executives and organizational leaders to half of previous levels and strengthened its austerity policy by requiring the use of economy class instead of business class for air travel. However, LG Electronics plans to maintain its business infrastructure in China and target the remaining premium demand with high-spec and high-quality product lines.

Industry-wide restructuring pressure in the home appliance sector is expected to persist for the time being. An industry insider commented, “Samsung Electronics appears to be gradually downsizing, and in effect, winding down its home appliance organization. With Chinese firms having seized the lead from TVs to panels, it is not a bad strategy to focus selectively on areas that remain profitable.”

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