Samsung replaces mobile-unit chief as Galaxy phones struggle

[SEOUL] Samsung Electronics Co replaced the executive overseeing its mobile-phone business as the company tries to protect a dwindling sales lead against Apple Inc. and Chinese makers.

Koh Dong Jin, who helped develop the latest Galaxy S6 and Galaxy Note 5 devices, takes over as president of the mobile communications business as Samsung heads toward its lowest profit in four years. He replaces Shin Jong Kyun, who remains a president and co-chief executive officer of the electronics business, Samsung Group said Tuesday as part of its annual management revamp.

The switch at the biggest business in the biggest division of Samsung Group is the clearest sign yet that Vice Chairman Lee Jae Yong is putting his own imprint on the conglomerate. That stands in contrast to 2014 when, just seven months after his father's debilitating heart attack, Lee left most executives in place during the traditional year-end changes.

"It was time for a change," said Lee Do Hoon, an analyst at CIMB Group Holdings Bhd. in Seoul. "Lee Jae Yong tried to keep the fame of those who were chosen by his father, but he made a handover in power to younger generations. The mobile business grew complacent, especially in design and functionality." Apple, Xiaomi Shin has faced rising pressure to improve the business as the smartphone arena gets increasingly crowded. Samsung's phone shipments are headed for their second straight annual decline in the face of intensifying competition from Apple in the high-end segment and China's Xiaomi Corp. and Huawei Technologies Co. in the budget business.

Shares of Samsung Electronics rose 1.6 per cent to 1.3 million won as of 10:15 am in Seoul. The stock has fallen about 1.7 per cent this year after a 3.3 per cent decline last year.

The management overhaul at Samsung's affiliates coincides with a power transition to Lee family heirs. After Chairman Lee Kun Hee was hospitalized in May 2014, his only son stepped into the leadership role and steered the group of more than 60 companies without being named chairman, leading a spree of deals and announcing the largest buyback ever at its key electronics unit.

The scion, known as Jay Y., wasn't named chairman in Tuesday's announcement. South Korean cultural norms dictate that the son typically doesn't get the top title while his father is alive, even as most analysts expect the heir known as Jay Y. to eventually take control.

While Lee Jae Yong's cautious approach last year provided stability to Samsung after his father's hospitalization, deeper reform is needed now given the performance of Samsung Electronics, Lee Sang Hun, an analyst at HI Investment & Securities Co., said before the announcement.

Shin, 59, oversaw Samsung's rise to No. 1 in the smartphone market as well as its recent troubles. When he took over the mobile division in 2011, Samsung was shipping 94.2 million smartphones a year. That soared to 318.2 million units last year, according to data compiled by Bloomberg.

Revenue for the telecommunications business doubled to 111.8 trillion won last year from 55.5 trillion won in 2011, while profit tripled to peak at 25 trillion won in 2013.

Earnings at the smartphone maker are expected to drop 8.2 per cent this year to the lowest since 2011, according to analyst estimates, and the company has already lost its position as the top seller in China, the world's biggest market. Shin will focus on "the long-term business strategy," Samsung said.

BLOOMBERG