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August 31, 2011 12:25 pm
Samsung on Wednesday said it would cut 10 per cent of the executives in its struggling liquid crystal display television business as part of a major reshuffle of the lossmaking division as display makers globally suffer from oversupply and slowing demand amid the global economic slowdown.
The world’s largest flat panel maker by sales will streamline its LCD organisation by combining teams and reduce the number of executives. “This is to strengthen competitiveness of the LCD business and stabilise the organisation amid the industry’s increasing uncertainties,” Samsung said.
The move follows its organisational reshuffle in early July to integrate its flat panel business with its relatively strong chip division. Its display panel business suffered a Won210bn operating loss in the second quarter and is expected to remain in the red in the current quarter.
The increasing losses at the display business are seen as another blow for the Korean company’s consumer electronics business as it is locked in a legal battle with Apple over patents related to its smartphones and tablet PCs. A court in Germany last week made a tentative ruling that Samsung’s tablets could not be sold there while the Netherlands also barred three Samsung smartphones due to the patent disputes.
Analysts said Samsung joined other display makers in reducing its output and converting some of its TV panel production lines into those for small-size panels amid booming sales of mobile devices such as smartphones and tablets. “Most players including Samsung are cutting output amid growing inventory concerns. Utilisation rates at Samsung and LG have fallen to about 70 per cent due to weak TV demand. It is hard to predict when demand will recover,” said Hwang Joon-ho at Daewoo Securities.
The sharp downturn, which started in the second half of last year, has forced Samsung’s rival, LG Display, to cut capital expenditure for this year and next. LG Display, the second-largest flat panel maker, said this week that it would cut its capex target for next year to about Won3,000bn, the lowest level in three years, which was more than 30 per cent lower than this year’s spending of about Won4,500bn.
LG also said it had no plans to build a new LCD factory in 2012 due to the industry’s excess capacity. It has delayed the construction of a $4bn factory in China after reporting an operating loss for a third straight quarter. Panel makers in Taiwan such as AU Optronics and Chimei Innolux have also cut their capital spending for this year.
Slowing TV demand has forced Samsung’s rivals to cut their sales target. In July, Sony cut its annual TV sales target by nearly 20 per cent to 22m units while Hewlett-Packard said this month that it was likely to spin off its personal-computer business.
LG Electronics, the world’s second-largest TV maker, is also reportedly cutting its TV sales target this year by 20 per cent.
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