Samsung Decreases R&D Investment for First Time

Mar 17, 2016

Samsung Group is accelerating a large-scale restructuring at its all subsidiaries.

According to Samsung and business industry sources on March 14, the total number of employees and executives, including contract workers, at Samsung Electronics’ headquarters stood at 96,902 as of the end of last year, down 2,480 from 99.382 at the end of 2014.

The number of Samsung Electronics’ employees had kept increasing since 2008, but it showed a downward trend for the first time last year. According to the Data Analysis, Retrieval and Transfer (DART) System of the Financial Supervisory Service (FSS), the number of executives, who submitted a report on stock ownerships due to the retirement between the end of last year and early this year, reached 28, but only five executives notified their stock acquisitions as they are newly elected as executives.

In addition, Samsung Electronics reduced the number of its R&D centers. As of the third quarter in 2015, Samsung Electronics had 41 R&D centers, down 3 from 44 centers a year earlier. The company merged two R&D centers in the U.S. in one and shut down its electronic materials research center and information application research center. It also cut down R&D investment. Accordingly, its research and development costs declined last year for the first time since the Asian financial crisis in 1998.

Samsung Group and Samsung Electronics said that they don’t have any intentional restructuring plans. However, some market watchers are saying that thousands of employees at Samsung Electronics alone left the company half-willingly and half not last year.

As Samsung Electronics, the chief subsidiary of the business group, is in such a situation, other Samsung subsidiaries are focusing on downsizing the workforce. The number of Samsung Display’s executives and employees dropped by more than 1,000 from 26,719 at the end of last year to 25,599 at the end of the third quarter last year, while Samsung SDI are accepting voluntary early retirement from deputy directors and managers.

Samsung C&T is also accepting voluntary early retirement from employees who joined the company before March 2013, and Samsung Heavy Industries decreased the number of its executives to 70 from 99 in 2014.

Furthermore, Samsung Engineering reduced the number of its employees by 700 for a year as of the end of the third quarter in 2014 as sales declined last year. During the same period, the number of employees at Samsung SDS, Samsung Card, Samsung Securities, Samsung Life Insurance and Cheil Worldwide also decreased by 214, 141, 56, 51 and 28, respectively. Currently, there is a rumor that Samsung Group is considering selling off its advertising unit Cheil Worldwide.

Industry experts believe that Samsung Group is taking a preemptive measure by downsizing the workforce in a bid to cope with the global economic downturn and fast-changing market environments. Due to the sluggish performance of its major businesses, such as smartphone, home appliance and IT, construction and shipbuilding, Samsung Group is also forced to seek other new business opportunities.

Recently, the group is seeking various new growth engines, including biotechnology, automotive application component, virtual reality, Samsung Pay and electric vehicle battery.

Since other major business groups have similar troubles with Samsung’s, Samsung’s measures are highly likely to spread to other firms.

Source: BusinessKorea