Samsung Electro-Mechanics pulled itself out of HDD Motor business and carried out restructure that was already planned. This is due to a prognosis of management efficiency’s result that was implemented by the group in last October, which asks for breakup of minor business that has low profitability. Although power modules and ESL, which were first brought up as the ones that needed to be broken up, were not included as the targets that needed to be broken up, there is a high possibility that there will be additional restructure.
While Samsung Electro-Mechanics’ sales and business profit in 2013 were 7.35 billion dollars (8.2566 trillion KRW) and 413 million dollars (464 billion KRW) respectively, it barely avoided a loss by making sales and business profit of 6.36 billion dollars (7.1437 trillion KRW) and 1.5 million dollars (1.7 billion KRW) in 2014. This is the reason why it received prognosis for its management efficiency and result in business restructure.
Every time when there was a change in market environment, Samsung Electro-Mechanics adjusted product’s portfolio by selling business and breakups. Partron, S-mac, Nanos, and Wisol were able to grow as main parts companies by breaking themselves from Samsung Electro-Mechanics.
It seems like the market is welcoming this situation. Although overall appearance will decrease somewhat as it takes out major business that is making loss, the market is anticipating improvement of profitability by focusing its ability into main business that is securing competitiveness in the market. Pushing for new businesses such as car electronic device that is being looked as next generation’s growth engine and wireless charging business which its market was recently formed, lowered burdens.
It is predicted that there will be increase of investment in main businesses such as camera modules and Multi-Layer Ceramic Condenser (MLCC) that are relatively bright in market forecast. It is planning to establish bulk of production facilities for lenses and actuators at factories in Vietnam and mass-produce camera modules during sometime this month. It is also extending facility of MLCC factories in Philippines by investing 256 million dollars (288 billion KRW). It is expected that both products will play the roles of locomotive in improving performance due to increase of demand in Chinese markets.
There is also possibility that electronic device products will replace HDD Motor business by making a new business unit group. Although New Business Department is taking the role of this process, it is being suggested that this business should be regularized early as it started pretty late compared to its competitors. Smartphone market, which is a previous main front industry, has limitations in improving profitability as it has uncertainty in long-term growth and there is a great demand for reduction of parts’ unit prices due to deepen competition.
Process of internalizing materials and parts will speed up as it tries to recover decreased sale’s size and have efficient production cost structure. It is pushing for not just bulk mass-production system for camera modules at factories in Vietnam, but self-production of variety of materials and parts that go into wireless charging modules as well.
Setting pulling out of HDD Motor business as the starting point, business circle is seeing that basis of ‘Choice and Focus’, which is built in group at large, is starting to be regularly implemented in Samsung Electro-Mechanics as well. It is a strategy that decisively breaks off any businesses that are weak in management performance and focus capabilities on excellent businesses with growth potentials and profitability.
After announcing that it is pulling out of HDD Motor business, Samsung Electro-Mechanics is saying at the demand of inquiry notice regarding pushing for minor business spin-off that although it is examining business spin-off that is weak in management performance for product’s restructure, there are no other decisions that are finalized than other than pulling out of HDD Motor business and selling remaining assets.
Staff Reporter Park, Jungeun | jepark@etnews.com