Vice Chairman Han Jong-hee, who visited the Suwon plant and attended IFA, received a report and asked questions such as “How far ahead are we?”
2Q TV·Home Appliances Operating Profit Margin 3.4%, Half That of Competitors… Chinese Home Appliance Companies Also Chasing Technology
Samsung Electronics Chairman Lee Jae-yong’s visit to the home appliance division in person is interpreted as an attempt to raise awareness among employees about the recent sluggish home appliance business. In the long term, securing technological superiority while improving low profitability is considered a task.
According to industry sources on the 11th, Chairman Lee visited the Digital City Home Appliances Division in Suwon, Gyeonggi Province on the 9th and personally inspected key products and technologies.
Before touring the site, the chairman had lunch with key executives, including Jong-hee Han, head of the Device Experience (DX) division (Vice Chairman), who attended ‘IFA 2024’, Europe’s largest home appliance exhibition. It is reported that the chairman received reports from the executives on the latest technologies and products showcased by Samsung Electronics and its competitors at IFA.
The chairman is said to have toured the AI-based product and technology exhibition space and repeatedly asked questions such as “Is this our unique technology?” and “How far ahead are we?” before saying, “The home appliance division still has a lot of work to do.”
We received reports on the status of competitors by sector and major companies by region, and also reviewed strategies related to AI home appliances. Samsung Electronics unusually produced Chairman Lee’s visit in the form of card news and posted it on the company bulletin board so that all employees could see it.
The chairman’s on-site visit this time was conducted as an internal report to executives and a status check without a staff meeting for communication purposes, and the questions were also made public in detail, which can be interpreted as an attempt to heighten the tension among executives and employees regarding the recent difficult business environment of the home appliance business.
Recently, Samsung Electronics’ home appliances and TV businesses have been experiencing stagnant and declining sales and operating profits. The combined sales of Samsung Electronics’ DA (Home Appliances) and VD (Visual Display) divisions in the second quarter of this year were KRW 14.42 trillion, up 0.2% from the same period last year. Looking at the home appliances division alone, sales in the second quarter are expected to decrease to KRW 7.29 trillion in 2022, KRW 7.14 trillion in 2023, and KRW 6.88 trillion in 2024.
The combined operating profit of the DA and VD divisions was 490 billion won in the second quarter of this year, down 33.8% from the same period last year. The operating profit ratio of the DA and VD divisions in the second quarter was 3.4%.
LG Electronics, its rival, is doing relatively well. LG Electronics’ home appliance (H&A) division’s sales for the second quarter of this year were 8.8429 trillion won, up 10.6% year-on-year, and operating profit for the same period was 694.4 billion won, up 16.3%. The operating profit ratio was 7.9%.
Although both companies are pursuing premium product-centered marketing, there is a significant difference in profitability. In the case of LG Electronics, the company has increased the proportion of B2B (business-to-business) with higher profit margins than B2C (business-to-consumer) and expanded the subscription business that rents products for 3 to 6 years. Subscriptions include service costs such as product management and replacement of consumables, so the profit margin is higher than lump-sum sales.
Samsung Electronics is also reviewing the feasibility of the business, including hiring subscription-related personnel, as it pursues B2B expansion.
The pursuit of Chinese companies is also fierce. At this year’s ‘IFA 2024’, Chinese companies such as Honor, Hisense, and TCL showed off their technological prowess that was no less than that of our companies, and some of their products were even evaluated as being ahead. For example, Roborock, the number one domestic robot vacuum cleaner market share, introduced a new product that can clear 5cm thresholds and enter low spaces to clean.
On the other hand, domestic companies have only recently begun to catch up by introducing all-in-one robot vacuum cleaners that combine mopping functions.
(Seoul = News 1)
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2024-09-12 05:52:38