Samsung Is Closing Some Low-Profit Production Lines and Shifting to Outsourced Manufacturing on April 28
Headquarters of Samsung Electronics. (Photo courtesy of Samsung Electronics)
Samsung Electronics has begun restructuring its home appliance business, closing some low-profitability production lines and shifting to outsourced manufacturing.
The move comes as uncertainty in the global business environment grows and market competition intensifies, with the company seeking to lay the groundwork for a renewed leap forward through fundamental structural improvement.
According to industry sources on April 28, the DA Division, which oversees Samsung Electronics’ home appliance business, recently held a management briefing for employees and presented a future vision aimed at improving profitability and securing sustainable growth drivers through rapid business restructuring.
The plan includes shutdown of some home appliance production lines including those for dishwashers and microwaves, and shift to outsourced production.
The company has also decided to close its Malaysia factory, which has served as a key overseas production base since 1989.
This course of action reflects the judgment that the company must overcome the structural limitations of its current home appliance business amid an increasingly difficult external environment and transform into a profit-based, growth-oriented operation.
Samsung Electronics’ home appliance business has been facing mounting difficulties, compounded by China’s low-price offensive alongside rising costs for key components including semiconductors, and increasing logistics expenses.
To drive business innovation, Samsung Electronics plans to focus more intensively on products that deliver the highest levels of experience and quality, and to accelerate its global Heating, Ventilation, and Air Conditioning (HVAC) business. The company will also simultaneously expand high-growth operations including Business-to-Business (B2B) and subscription services.
Accordingly, the company has decided to concentrate its capabilities on strategic products with globally top-tier competitiveness, including Bespoke series washing machines, refrigerators, and air conditioners.
In the first half of this year, Samsung Electronics unveiled new AI home appliance products offering optimal user experiences across refrigerators, washing machines, air conditioners, robot vacuum cleaners, and clothing care systems.
The HVAC business, identified as a key future revenue driver, will focus intensively on the central air conditioning sector, which is projected to grow at an average annual rate of more than 9%, in partnership with Germany’s FläktGroup, which was acquired last year.
The company plans to expand its HVAC customer base centered on global AI data centers into Europe, North America, and Asia, and will continue to strengthen liquid cooling solutions designed to enhance data center cooling capabilities.
In order to deepen its push into the B2B market through SmartThings, its AI home solution platform, the company will also expand B2B-specialized product lineups and increase dedicated personnel. The company further plans to accelerate domestic sales of its growing home appliance subscription service and move swiftly toward overseas expansion.
Kim Cheol-gi, head of the DA Division, said, “We must approach this with a desperate sense of crisis that this year is the last ‘golden time’ to carry out structural innovation in the home appliance business, and execute selection and concentration at maximum speed to achieve a complete rebirth as a profit-based and growing business.”
Samsung Electronics has started, at the end of March, a management audit of its general domestic operation which is responsible for domestic TV, home appliance, and smartphone sales and marketing.
According to industry sources, the audit is being led not by the management audit team within Samsung Electronics’ Business Support Office, but by the management audit team of the Device eXperience (DX) Division.
Industry observers view this as a continuation of last year’s audit of the Visual Display (VD) Division led by the Business Support Office, noting that it carries significant meaning in that the scope has been expanded beyond production departments to encompass front-line sales operations.
It is widely expected that Samsung Electronics will use the management audit as an opportunity to comprehensively redesign the cost structure of its sales organization.
Kim Eun-jin
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