Samsung tightens its belt amid crisis winds

Samsung Electronics headquarters in Seoul. (Newsis)

Samsung Electronics, a leading tech giant in smartphones and semiconductors, is seen implementing austerity measures, reducing headcounts and downsizing celebratory events as it falls behind global peers in its core product markets.

On Wednesday, Bloomberg reported Samsung Electronics is expected to lay off about 10 percent of its total overseas staff of 147,000, with the latest headcount cut being carried out in its headquarters in Southeast Asia, Australia and New Zealand.

The company already laid off about 10 percent of jobs in India and some parts of Latin America, and is expected to further reduce headcounts in other overseas subsidiaries, the news outlet added, citing sources familiar with the matter.

Overseas staff make up more than half of the company's total employees of more than 267,800.

Over the recent staff reductions, Samsung maintained its workforce adjustments are only a part of its "routine activity."

“Some overseas subsidiaries are conducting routine workforce adjustments to improve operational efficiency,” a Samsung official said. “The company has not set a target number for any particular positions.”

Industry observers view the tech giant is tightening the belt amid declining performance in its core products including memory chips and home appliances.

In the wake of the artificial intelligence boom, Samsung, the world's largest memory chip market, ramped up investment for AI chip production, only to fall months behind runnerup crosstown rival SK hynix. In the rising High Bandwidth Memory chip market, Samsung is struggling to catch up to SK hynix, which announced mass production of the most up-to-date 12-layer HBM3E chip last month.

The HBM chips, rising as crucial components for graphic processing units to power advanced AI models, have been expanding its share in the global DRAM market, driven by increasing demand and growth of the world' top GPU maker Nvidia.

With a severe downturn in the global semiconductor market, Samsung' chip division recorded the worst operating profit loss of 14.9 trillion won ($11.3 billion) in 2023, which led the company's total operating profit to 6.54 trillion won -- the lowest in 15 years.

With intensifying competition in the global smartphone market, Samsung is also seeing less-than-impressive sales for its latest foldable smartphone Galaxy Z Fold 6 and Galaxy Z Flip 6 launched in July.

Sales of the tech giant's home appliances is also going down. In the April-June period, Samsung posted an operating profit of 490 billion won, down 34 percent on-year.

Reflective of the crisis sentiment, Samsung shares temporarily sled to 59,900 won, marking a new low of the past 52 weeks on Wednesday. The stock recovered to 61,500 won as of the afternoon.

Market analysts are lowering the earnings prospects for Samsung for the July-September period. Market Intelligence firm Yonhap Infomax collected the opinions of 16 securities firms last month and estimated Samsung's operating profit for the third quarter to be 10.4 trillion won.

This is lower than the initial forecast of 14 trillion won, with securities firms recently lowering their expectations. iM Securities initially forecast Samsung to log an operating profit of 14.6 trillion won in Q3, but reduced it to 11.2 trillion won, down by 23.3 percent. KB Securities estimates 9.7 trillion won while Korea Investment & Securities forecasts 10.3 trillion won.

Samsung Electronics is seen moving to postponed or downsized upcoming events in an apparent move to cut down spending. The company canceled the event for celebrating the 50th anniversary of the company’s semiconductor business that was planned around the end of this year. The company's Global Foundry Forum planned to take place in Europe, China and Japan in the second half of this year have been changed to online events.

"Cutting down cost is one way to contain risks in difficult times. But it is time the company leadership come up with a strong message on how they will address the current challenges and come up with a long-term strategy to keep up growth," an industry official said.

By Jo He-rim(herim@heraldcorp.com)