Shuffle affects morale at some Samsung affiliates

A mid-level Samsung Group employee worked late Wednesday night slogging through employee evaluations as high-ranking officials spent the entire day at meetings on big changes coming up for the conglomerate.

“We’ve been encouraged by the top brass to cut the number of our staff this year,” said the Samsung employee, who requested anonymity due to the sensitivity of the issue.

“In more than a decade working for Samsung, I haven’t felt as gloomy as I feel today. It’s so different from last year when we received hefty bonuses thanks to the outstanding achievements in the smartphone business.”

Job insecurity is spreading at the nation’s biggest conglomerate especially since several affiliates - including defense contractor Samsung Techwin, Samsung General Chemicals and even a fiber-optic production plant in Gumi, North Gyeongsang - were sold off to the utter astonishment of their employees.

“My colleagues at the companies being sold still can’t believe it and many are in dismay and utter confusion,” said another Samsung employee, who also asked to remain unnamed.

“Even if they aren’t losing their jobs, it seems their pride has been heavily hurt. And that kind of emotion is affecting other people in the conglomerate.”

The anxiety within Samsung Group is in contrast to LG Group, which hasn’t had a major layoff in recent years and is on a high thanks to the warm reception for its G3 smartphone, which was launched earlier this year.

In recent months, Samsung Group has been undergoing major changes as the 46-year-old heir apparent, Vice Chairman Jay Y. Lee, has started a revamp to steer the conglomerate away from over-reliance on smartphones to become a more diversified, software-strong enterprise.

Executive promotions announced Thursday reflect the changes that Lee has been pushing. Not only has the average age of the company’s executives been lowered to bring in more fresh blood, but the conglomerate is trying to bring more diversity to its work force by promoting women and non-Koreans.

The promotion of 33-year-old Panav Mistry, who is responsible for the development of Samsung’s wearable smartwatch Galaxy Gear, is considered a huge step and a sign of a more aggressive approach to innovative technology development. Mistry is Indian.

Promoting David Steel, senior vice president of strategic marketing for Samsung Electronics’ North American operations, to executive vice president of Samsung headquarters indicates that Vice Chairman Lee is planning more aggressive marketing and promotions in the global market.

The slimming of Samsung Electronics’ mobile communication department is considered a major overhauling of its businesses.

In recent years, Samsung Electronics has been expanding by absorbing major tech businesses, from personal computers to MP3s and digital cameras.

“Expansion of the organization is not a problem when performances are good,” said a high-ranking Samsung official. “But at a time like this, when Samsung’s mobile business is faced with a crisis, a different business approach is inevitable.”

In the third quarter of this year, Samsung Electronics posted a 4 trillion won ($3.5 billion) operating profit, a 60 percent drop compared to the 10 trillion won posted a year earlier, and a 44 percent plunge compared to the second quarter.

Since 2012, when Samsung Electronics had a major hit internationally with the success of the Galaxy S3, its smartphone division has gotten particularly bloated.

At the end of 2011, the number of high-ranking executives at the mobile communication department was 144. In the next three years, 61 executives were added.

The IT and mobile communication division has a work force of 28,000 and there have been overlapping teams.

The IT and mobile communication business accounts for 43 percent of Samsung Electronics’ sales. The company’s overall operating profit is less than the 4.4 trillion won operating profit made from its IT and mobile communication business alone.

A downturn in the smartphone business even affects other affiliates including battery maker Samsung SDI, which also reported disappointing results this year.

The situation is unlikely to improve in the immediate future. Analysts are predicting that Samsung Electronics’ fourth-quarter operating profits will be around the same as the third. They could also be worse, as its latest high-end Galaxy Note 4 smartphone hasn’t been a winner, unlike Apple’s latest iPhones, which even in the Korean market are in short supply. Consumers have to wait at least two months before they can get their hands on an iPhone 6.

There is also speculation that Samsung Electronics is reorganizing its medical businesses. The medical equipment unit of Samsung Electronics is reportedly in the process of being merged into Samsung Medison.

Samsung’s financial affiliates have been undergoing major restructuring.

BY LEE HO-JEONG, KIM YOUNG-MIN [ojlee82@joongang.co.kr]