Samsung has announced that it is going for a business restructure program in order to reduce its dependence on the electronics business and to explore new market alternatives.
According to the Korea Times report, the South Korean tech giant is looking to re-align its subsidiaries through internal mergers and acquisitions (M&A) and diversify its business, amid increasing market uncertainty and competition from rival electronic giants.
The first and foremost priority for Samsung would be to reduce its dependence on Samsung Electronics, its affiliate which accounted for over 75 percent of the group’s total annual profit and revenue in 2013, both in terms of profits and sales. Samsung Electronics reportedly clocked a 28 percent growth in net profit last year.
Samsung’s other subsidiaries, on the contrary, faced profits dip in their respective markets, including Samsung Fine Chemicals, with a drop of 95 percent in net profit.
“Without another ‘Samsung Electronics’, the group may lose competitiveness sometime later,” a Samsung spokesperson said while announcing the move.
“Our chairman ordered top management at Samsung affiliates to develop business models to ensure profit sustainability. Samsung has been restructuring businesses to create the next Samsung Electronics by concentrating on some key businesses, including consumer electronics, chemicals, construction, heavy industries, and finance.”
The spokesperson added that Samsung is not in crisis but is now facing serious challenges.
The move includes a merger between Samsung General Chemicals and Samsung Petrochemical, to become Samsung General Chemicals. The new merged entity, Samsung General Chemicals, is slated for launch in June.
Also, Samsung SDI, world’s largest manufacturer of TV displays and smartphone batteries, will take over Cheil Industries, another Samsung affiliate that produces electronic materials and chemicals.
“The main purpose of business restructuring or realignments is to boost synergy by combining units within the same value chain. Such a trend will be accelerated as Samsung founding families directly control the initiatives,” the spokesperson added.
Company executives pointed to the company’s construction business, which includes Samsung C&T, Samsung Engineering, Samsung Everland, and Samsung Heavy Industries, as the next up for restructuring.
