Samsung Electronics to Slash Overseas Workforce by up to 30%: A Strategic Move Amid Economic Slowdown
By Seunggyu Lim and Aditya Kalra
SEOUL/NEW DELHI (Multibagger) - Samsung Electronics (KS:), the global leader in smartphones, TVs, and memory chips, is set to significantly reduce its overseas workforce by up to 30% in certain divisions, according to three insiders with direct knowledge of the matter.
Major Workforce Reduction in the Works
South Korea-based Samsung has directed its subsidiaries worldwide to cut sales and marketing staff by approximately 15% and administrative staff by up to 30%, two of the sources revealed. This strategic plan is expected to be executed by the end of the year, impacting jobs across the Americas, Europe, Asia, and Africa, as confirmed by six other sources familiar with the situation.
The exact number of employees to be affected, specific countries, and business units involved remain undisclosed. The sources opted to remain anonymous due to the confidential nature of the job cuts.
In a statement, Samsung described the workforce adjustments at some overseas operations as routine measures to enhance efficiency, clarifying that there are no specific targets for these plans and that production staff will not be impacted.
Current Workforce Overview
As of the end of 2023, Samsung employed a total of 267,800 people, with over half, or 147,000 employees, based overseas, according to its latest sustainability report. The majority of these jobs were in manufacturing and development, while sales and marketing staff accounted for around 25,100 employees, and 27,800 people worked in other areas.
The "global mandate" for job cuts was issued approximately three weeks ago. Samsung's India operations have already begun offering severance packages to mid-level employees who have recently left, according to a direct source. The total number of employees who may be required to leave the India unit could reach 1,000, out of the 25,000 people Samsung employs in India.
In China, a South Korean newspaper reported that Samsung has informed its staff of expected job cuts that could affect about 30% of its employees in the sales operation.
Facing Significant Challenges
The job cuts come as Samsung faces increasing pressure on its key business units. The company's core chip business has been slower to recover from a severe industry downturn that drove its profit to a 15-year low last year.
In May, Samsung replaced the head of its semiconductor division to address a "chip crisis" and catch up with smaller rival SK Hynix in supplying high-end memory chips used in artificial intelligence chipsets.
In the premium smartphone market, Samsung is contending with fierce competition from Apple (NASDAQ:) and China's Huawei. Additionally, it has long trailed behind TSMC in contract chip manufacturing. In India, which generates around $12 billion in annual revenue for Samsung, a strike over wages is disrupting production.
One source familiar with the reduction plans indicated that the job cuts are being made in anticipation of a slowdown in global demand for technology products as the global economy decelerates. Another source mentioned that Samsung is aiming to bolster its bottom line by reducing costs.
It remains unclear if job cuts will extend to Samsung's headquarters in South Korea. One insider noted that layoffs in South Korea would be challenging due to the political sensitivity of the issue. Samsung Group, the conglomerate to which Samsung Electronics belongs, is the country's largest employer and plays a crucial role in its economy.
Job cuts could also provoke labor unrest domestically. Recently, a South Korean workers' union at Samsung Electronics went on strike, demanding higher wages and benefits.
Shares in Samsung Electronics, South Korea's most valuable stock, hit a 16-month low on Wednesday. Some analysts have recently lowered their profit estimates for the company, citing a weak recovery in demand for smartphones and personal computers.
Breaking It Down: What Does This Mean for You?
1. Global Workforce Reduction
- What: Samsung is cutting up to 30% of its overseas staff in some divisions.
- Why: To improve efficiency and prepare for a global economic slowdown.
- Who: This impacts employees in sales, marketing, and administrative roles across the Americas, Europe, Asia, and Africa.
2. Financial Impact
- Shares: Samsung's stock is trading at its lowest in 16 months.
- Profit Estimates: Analysts have cut profit estimates due to weak demand for smartphones and PCs.
3. Competitive Pressure
- Chip Business: Samsung's semiconductor division is lagging, impacting profits.
- Smartphones: Facing stiff competition from Apple and Huawei.
- Manufacturing: Trailing behind TSMC in contract chip manufacturing.
4. Domestic Challenges
- Political Sensitivity: Job cuts in South Korea are difficult due to political implications.
- Labor Unrest: Potential for increased strikes and demands for better wages.
How This Affects You
- Investors: Be cautious with Samsung stocks due to ongoing financial and competitive challenges.
- Employees: Job security is uncertain, particularly for those in sales, marketing, and administrative roles overseas.
- Consumers: Potential impact on product availability and innovation as Samsung navigates these challenges.
By understanding these developments, you can better navigate your investments, career decisions, and consumer choices in a rapidly evolving tech landscape.