Samsung chops its IM division

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Samsung chops its IM division

Samsung Electronics, struggling with collapsing profits, will drastically slim its IT and mobile (IM) division following the group’s annual president-level reshuffle slated for next month.

According to the JoongAng Ilbo and industry sources on Friday, the Korean electronics giant will trim up to 30 percent of its employees and executives in the IM division, which manages its smartphone business, by relocating them to other divisions based on performance evaluations.

Samsung Electronics has three divisions - IM, consumer electronics (CE) and device solutions (DS). About 28,000 employees currently work in the IM division, which is nearly one-third of the company’s total employees. If the plan is executed, up to 6,700 employees could be shifted.

This would be the largest restructuring since the IM division was established in late 2012.

“Although the main target will be executives since the performance this year wasn’t great, other employees are also subject to restructuring after thorough evaluations,” an official from the company said.

Samsung reportedly finished performance evaluations of its executives and is currently drawing up a reshuffle plan. It is expected that the group’s core decision makers like Samsung Electronics Vice Chairman Jay Y. Lee, heir apparent to the group chairman, Lee Kun-hee, will make the final decisions in the next few weeks.

Industry insiders said that the restructuring of the IM division was somewhat expected considering the fall in profits on smartphones and Samsung’s principle of “compensation follows performance.”

The performance of the IM division has been squeezed by Apple in the high-end smartphone market and Chinese companies in the low end.

According to data from Strategic Analytics, a U.S.-based market researcher, Samsung in this third quarter held 24.7 percent of the global smartphone market, which was the first time since 2012 that its share fell below 25 percent. Although it is still No. 1, its share fell 10.3 percentage points from a year ago.

Furthermore, the IM division in this third quarter had an operating profit of 1.75 trillion won ($1.5 billion), which is only one-fourth of what it earned a year ago. The division accounted for more than half of the company’s total operating profit since the third quarter of 2011, but in this third quarter, it only accounted for 42.5 percent.

The company’s new cash cow was the DS division, which manages semiconductors. It had an operating profit of 2.26 trillion won in the July-September period.

“The smartphone market is changing rapidly, but the IM division seems to be lacking tension and the restructuring should be focused on making the division slim and simple to react fast to market changes,” said an official from Samsung Group.

The number of employees in the IM division has been swelling as Samsung’s smartphone business got bigger. But as it grew, its decision-making system got complex and slow.

Currently, there are seven presidents in the IM division alone and due to the welling number of employees, the company had to rent offices near its main building in Seocho District, southern Seoul.

The IM division is divided into the mobile business, network business and mobile solution center (MSC), and company sources suspect the MSC could be absorbed into the mobile business unit.

In September, the company relocated some 500 software employees in the IM division to other divisions. Most of them were developing Tizen, Samsung’s own operation system.

BY Lee So-ah, Joo Kyung-don []

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