Samsung Electronics creates component division as LCD struggles
By Miyoung Kim
SEOUL | Fri Jul 1, 2011 1:22am EDT
(Reuters) - Samsung Electronics Co named the head of its chip business to lead a newly created division encompassing the firm's semiconductor and flat-screen operations in a move widely seen as aimed at overhauling its struggling LCD unit.
The change marks a revival of the consolidated business structure for Samsung's component business, which was introduced in January 2009 but abolished in December that year to give more power to each component business and ensure they ran like separate companies.
"The creation of the new organization is aimed at enhancing cooperation and generating synergy in Samsung's memory chips, system LSI, LCD as well as Samsung Mobile Display," parent Samsung Group said in a statement on Friday.
"The changes will also help Samsung's component businesses further ...improve relationships with their global clients."
Kwon Oh-hyun, president of Samsung's semiconductor business, will lead the new division, called Device Solutions, and also take over the role of Chang Wonkie, head of Samsung's LCD division and chief executive of S-LCD, its flat-screen joint venture with Sony Corp.
Chang will take an advisory role, assisting production and facility innovation in Device Solutions.
The rare mid-year restructuring comes as Samsung struggles with heavy losses from its flat-screen operation. Business ties with Apple, Samsung's biggest customer, are in jeopardy as the two firms are locked in escalating legal battles over their flagship smartphone and tablet products.
Samsung typically reshuffles its management in December or early January.
By 1:15 a.m. EDT, shares in Samsung, Asia's most valuable technology firm with a market value of some $125 billion, rose 3.8 percent, in line with strong performance of tech shares such as LG Display, up 3.7 percent, and Hynix Semiconductor, up 5.6 percent.
LOSS-MAKING LCD
Media reports said Samsung Electronics chairman Lee Kun-hee had decided to reform underperforming businesses after he was briefed on the firm's first-half performance on Thursday.
A Samsung spokeswoman said Friday's restructuring is also aimed at normalizing its LCD business as early as possible.
Samsung lost its No.1 title in the global LCD market to home rival LG Display in recent quarters. Its dominance in 3D panel supply is increasingly challenged by LG's new display and a conversion of its LCD production process failed to improve yield significantly, forcing it to struggle with losses.
"With its performance lagging that of LG Display, many had expected changes in Samsung's LCD division and a structural overhaul will help it regain its competitiveness," said Kim Young-chan, an analyst at Shinhan Investment Corp.
Samsung, the world's biggest technology group by revenue, is set to report its second-quarter earnings estimates next week and analysts have been lowering their forecasts due to disappointing results from its LCD flat-screen business.
Samsung is set to report 3.9 trillion won ($3.6 billion) in second-quarter operating profit, according to a consensus estimate of 32 analysts by Thomson Reuters I/B/E/S, up from 2.95 trillion won in the first quarter, but down from 5.0 trillion won a year ago.
Its Display Panel division, which the LCD business dominates, reported a 230 billion won operating loss in the first quarter versus a 490 billion won profit a year ago, hit by weak demand from TV manufacturers and low productivity after it converted production processes.
Samsung said J.K. Shin, head of its mobile business, would also oversee the group's digital camera business as a part of its overall business restructuring.
(Editing by Jonathan Hopfner)
Credit: Reuters (www.reuters.com)
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