Trimming the Fat
Samsung Electromechanics will pull out of the hard disk drive (HDD) business to concentrate on core businesses, because the HDD business has suffered chronic deficits.
The company announced on June 26 that it has decided to stop manufacturing and selling HDD motors, explaining that the decision was made because the market environment has sharply deteriorated, with the continuous decline of demands despite its self-rescuing efforts. The decision comes a month after it said it would contemplate exiting non-core sectors.
Samsung Electromechanics is withdrawing from the business three years after the company bought Japanese company Alphana Technology for 150 billion won (US$133 million) in 2012.
One of the major reasons that Samsung Electromechanics pulled out of the HDD business was that the market demand shifted quickly to solid state drives (SSDs), which dominate the laptop and desktop market, putting the HDD business performance into a sharp drop.
The company’s accumulated deficits since buying the Japanese company reportedly reached 160 billion won (US$142.5 million) in the motor business alone. The HDD division reported 370 billion won (US$330 million) in sales, with a 170 billion won (US$151 million) operating loss last year.
The restructuring comes mainly from the slow camera module business, one of the firm's core businesses, as Samsung Electronics' new flagship smartphones, the Galaxy S6 and S6 Edge, showed sluggish sales. The company’s total operating profits also plunged to 1.7 billion won (US$1.5 million) last year from 464.0 billion won (US$413 million) in 2013, with sales of 7.14 trillion won (US$6.36 billion), down 13 percent from a year ago.
In the meantime, the Samsung Group has pulled out of non-essential or low-growth units. At the end of last year, Samsung Electronics sold its fiber optics business and reduced its light-emitting diode (LED) business. Samsung Group also decided to sell its chemical and defense businesses to the Hanwha Group.