Tech giant retreats from low-margin markets while expanding AI across products, manufacturing
Samsung Electronics used its twice-yearly strategy meetings this week to map out a turnaround for its consumer products business, betting on artificial intelligence and a retreat from low-margin markets to revive a division dwarfed by its booming chip operation.
The meetings ran on Tuesday and Wednesday at Samsung's Suwon, Gyeonggi Province, campus under co-CEO Roh Tae-moon, who heads the Device eXperience division that includes the smartphone and TV business, working through the mobile, visual display and home appliance units in turn. Samsung holds these sessions every June and December so that senior executives and overseas subsidiary heads can review operations and set medium-term direction.
The semiconductors division was to hold its own session Thursday.
This round carried more weight than most because of how lopsided Samsung has become. In the first quarter the chips division earned 53.7 trillion won ($35.2 billion) of the group's record 57.2 trillion won in operating profit, roughly 94 percent, while the devices division saw its quarterly profit slip to 3 trillion won from 4.7 trillion won a year earlier, even as revenue held steady.
The market has gone further still. A late-May valuation by Mirae Asset Securities put the devices business at just 2.6 percent of Samsung's total enterprise value, down from 42 percent 10 months earlier, with chips accounting for almost all the rest.
Part of the squeeze is self-inflicted. The same memory boom lifting the chip division has raised the cost of the components for the devices business. Contract prices for commodity DRAM climbed 90 to 95 percent in the first quarter from the previous quarter, according to TrendForce. Throw in softening demand and price competition from Chinese rivals, and DS Investment & Securities now projects Samsung's TV and appliance operations could post an operating loss of 326 billion won this year.
Management's answer includes two parts, and the more concrete half is the retreat. Samsung stopped selling TVs and home appliances in mainland China in May, ending a presence that began 34 years earlier. The pullback runs deeper than China. The home appliance unit is reportedly shifting some lines, such as dishwashers and microwave ovens, to outside manufacturers and has closed a longtime production plant in Malaysia. The stated aim is to drop low-margin products and concentrate on premium ones.
The clearest sign of where the business is headed sits at the top of the TV unit.
Samsung named Lee Won-jin to lead visual display in May, making him the first nonengineer in the role in about two decades. Lee came up through Google and Adobe and built the Samsung TV Plus streaming service. He has called for the company to become an "AI full-stack company" spanning chips and services. The phrase points away from one-off hardware sales toward software and recurring revenue from advertising and streaming.
The second part is a broader push into AI.
Employees in the devices division began using external generative AI tools such as ChatGPT, Gemini and Claude in their work on June 12. Further out, Samsung wants to convert its production plants worldwide into "AI-driven factories" by 2030, running digital-twin simulations — virtual replicas of a real production line — to test and adjust everything from materials intake through shipment.
mjh@heraldcorp.com