Samsung to outsource low-margin appliance production - 동아일보

Samsung Electronics plans to scale back in-house production of low-margin home appliances and rely more on outsourcing, as it restructures its struggling consumer electronics business. The move comes as the company faces intensifying competition from low-cost Chinese rivals, rising memory chip prices and softening demand. While its Device Solutions division continues to generate strong earnings from semiconductors, the Device Experience division, which includes appliances, TVs and mobile devices, is under growing cost pressure. Samsung’s Digital Appliances division laid out the plan during an internal briefing on the 17th, outlining steps to improve profitability. The company said it will reassess each product line and shift less profitable items to external manufacturing. Under the plan, Samsung will continue producing higher-value appliances such as refrigerators, washing machines and air conditioners in-house. Lower-margin products, including dishwashers and microwave ovens, may be outsourced through original equipment manufacturing or original design manufacturing arrangements. Samsung already relies on external production for some items, including its AirDresser. The latest move signals a broader effort to streamline operations and cut costs in non-core segments. “This year is the last opportunity to fundamentally reshape the appliance business,” said Kim Cheol-gi, head of the Digital Appliances division. “We must transition to a structure centered on profitability.” The company is also considering withdrawing from appliance and TV sales in China. Japan’s Nikkei reported on the 27th that Samsung may decide as early as this month to halt sales, with plans to clear inventory and fully exit the market within the year. Production bases for refrigerators, washing machines and air conditioners would remain, but local sales could be discontinued. The strategy reflects prolonged weakness in the segment. In the fourth quarter of last year, Samsung’s Digital Appliances division and Visual Display division, which handles TVs, posted a combined operating loss of about 600 billion won. Losses are expected to widen this year, clouding the outlook. Industry estimates put the appliance division’s operating margin below 5 percent, compared with roughly 60 percent for the semiconductor business. An industry official said the ongoing semiconductor upcycle, fueled by demand for artificial intelligence, is pushing up memory prices and adding to cost pressures on finished goods businesses. “As the semiconductor cycle strengthens, cost burdens on consumer electronics inevitably rise,” the official said. “The gap in performance between Samsung’s chip business and its finished products division is likely to widen further.” 이민아 [email protected]