Samsung Phone Division Profitability Deteriorates As Spending Is Tightened: Executives Travel In Economy Class

IT HomeMarch 13 — According to a post published yesterday (March 12) by The Korea Economic Daily, Samsung Electronics' Device eXperience (DX) division is facing challenges due to soaring memory chip prices and intensifying competition from Chinese companies.Leading to a deterioration in profitability, a comprehensive tightening of operations is currently being initiated.

Samsung's Device eXperience (DX) division, which covers businesses including smartphones, TVs, and home appliances, is reportedly intensively discussing and implementing multiple cost-cutting measures under the leadership of its Chief Financial Officer (CFO).

To effectively control daily expenses, the DX department has significantly reduced the overseas travel budget for senior executives. The overseas flight standards for vice presidents and lower-level executives will be adjusted.It has been clearly specified that the upgrade from Business Class to Economy Class is mandatory.

Meanwhile, Samsung is internally discussing relaxing the conditions for voluntary resignation applications for the regular operation of the DX division. The management plans to further reduce the workforce and lower long-term labor costs by expanding the eligible population and increasing the severance payments.

According to reports, the primary reason prompting the DX Division to implement the aforementioned drastic cost-cutting measures is the continued deterioration of profitability. Recently, prices of memory semiconductors—the core components of IT products—have surged sharply, directly driving up manufacturing costs for various smart terminals.

Moreover, in the global TV and home appliance markets, Samsung faces intense competition from Chinese companies, resulting in severe dual pressure on its market share and product profit margins, thereby significantly increasing the financial strain on its hardware business division.

Image source: Samsung official website

This local crisis stands in stark contrast to Samsung's overall bright earnings forecast. The Device Solutions (DS) division, which includes the semiconductor business, is performing strongly and is expected to drive Samsung Electronics' overall first-quarter operating profit to exceed 40 trillion won for the first time in history. However, severely affected by the rise in component prices, the DX division's first-quarter performance is likely to fall to the "worst ever" level.