SEOUL : Samsung Electronics Co Ltd and LG Electronics Inc, known for their snazzy consumer electronics, are struggling to make their low-tech home appliance divisions work.
The operations that make refrigerators, washing machines, air conditioners and microwave ovens are suffering from competition, frail consumer spending at home and slow global demand.
This is the only area where success “” and profit growth “” has eluded both companies. Other businesses of making sleek, folding mobile phones featuring cameras and flat screens for televisions and computers have taken the market by storm. In an attempt to mimic that performance, Samsung and LG have put their top managers in charge of fixing the divisions, which are focusing on premium, more lucrative products and are banking on a rebound in domestic spending.
Analysts agree a pick-up in demand is likely but would like to see results soon. “Samsung should use its strong brand image in other successful businesses to rebuild its home appliance division,” said Yu Chang-Eyun, technology analyst at BNP Paribas Peregrine. “The best of Samsung’s people are in more profitable businesses like memory chips, flat screens or handsets.”
The home appliance business is more crucial for LG, which made white goods its mainstay in the late 1950s, than for Samsung, Asia ‘s most valuable electronics firm with a market value of $73 billion. It accounts for just 7% of Samsung’s revenues, or 860 billion won ($735 million) in the fourth quarter. LG, by contrast, derives more than a fifth of its sales from appliances, or 1.2 trillion won in the fourth quarter.
New Leadership: Samsung put Yun Jong-yong, a vice chairman and one of the company’s most powerful men, in control of the white goods business in January after reassigning the former president to the parent group’s cultural foundation. LG Electronics appointed vice-chairman Kim Ssang-su as the chief executive in September. He is credited as the brain behind LG’s rise to become South Korea ‘s biggest home appliance maker and the world’s fifth-largest mobile phone maker.
Both men, known for innovative ideas, have risen to the top of South Korea ‘s corporate empires without the aid of blood ties to the companies’ founding families.
“We’ve put Yun to oversee the digital appliance division hoping he can aggressively spearhead restructuring with his strong leadership,” said Samsung spokesman James Chung.
From The Economic Times