Samsung’s Goal for the Coming Years Is Clear: To Catch Up With Taiwan’s TSMC
If Samsung will not leave the consumer electronics, growth will be sought on the side of the semi-conductor world.
Samsung Electronics has taken all the analysts by surprise at the beginning of December 2021. The largest electronics group on the planet has just announced in a press release that it will thoroughly overhaul its internal organization and its management team. For Samsung, it is to activate “the new phase of growth of the company and strengthen its competitiveness”.
The industrial conglomerate Samsung, which controls Samsung Electronics, has always refused to dismantle, as the activist funds would have liked, the three different divisions of the company and preferred to continue to head them all to better face the different economic cycles. But on December 7, 2021, it was revealed that Samsung Electronics will still reorganize into two divisions.
After General Electric, which has just split into three entities, the fashion is now to reorganize.
Samsung reorganizes to reflect its new strategic focus for the coming years
A first entity called “SET” will be in charge of all consumer products (TVs, home appliances ...) and smartphones, which were separated until now. The semiconductor design and production activities, which show the greatest growth potential, will form a second entity.
The implementation of this new architecture will be accompanied by a major reshuffle in the management of Samsung Electronics. The three co-CEOs, who have each presided over a division since 2017, will step down and be replaced by two new co-CEOs. Former TV division boss Han Jong-hee will take over the consumer division. Kyung Kye-Hyun, the former head of Samsung Electro-Mechanics, will take over the heavy responsibility of orchestrating the offensive in semiconductors.
Both executives will continue to work under the direction of Jay Y. Lee, the de facto boss of the Samsung empire. At fifty-three, the grandson of the conglomerate's founder has yet to assume the title of president that his father held until his death last year, six years after a heart attack that sent him into a vegetative state.
But the “young” Lee is still extensively reorganizing the conglomerate, which he controls with his sisters, and reorienting it toward new activities. Decisions that he was able to initiate only after his release from prison last August, following his conviction in a vast corruption case also involving the former South Korean president.
Samsung now wants to catch up with TSMC in a semiconductor market that looks extremely promising for the future
If he does not want to abandon the consumer electronics, not very profitable, and will continue the development of smartphones which Samsung is still the largest manufacturer in the world, with 20% of the global market, Jay Y. Lee is convinced that the strength of Samsung, in the long term, will be on the semiconductor market. Semiconductors generate nearly half of the company's operating profits.
The group is already the world leader in DRAM and NAND memory chips but wants to grow in the market for logic chips, such as application processors, ASICs, or Cmos sensors, which the group intends to produce in its ultra-technological foundries for other big names in global electronics, such as Qualcomm, Nvidia, Google or Tesla.
Samsung has made no secret of its desire to overtake Taiwan's TSMC, which largely dominates this extremely lucrative and rapidly expanding market. To achieve this goal, Samsung Electronics plans to devote a large part of its 200 billion dollars investment budget to its semiconductor division over the next three years.
The objective is therefore clear for Samsung, which could be helped in its will by geopolitical considerations. America wants to reduce its dependence on TSMC so that Taiwan does not represent such a strategic issue in the future. By giving more room to other players, such as Samsung, America wants to become autonomous in the semiconductor market in the future.
The announcement at the end of November 2021 by Samsung of the construction of a semiconductor factory in Taylor, Texas is clearly in line with this. This $17 billion investment is the largest ever made by Samsung in the Americas. It will improve the supply chain resilience of crucial logic chips and will boost the production of advanced semiconductors.
This confirms Samsung's true strategic objective for the years to come.
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