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Samsung's Poor Financial Performance Spills Over to Infighting

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Samsung Electronics' wireless business unit is reportedly seeing infighting between the manufacturing and purchasing departments since the manufacturing arm is gradually increasing the adoption of in-house-made components, edging out the purchasing arm's presence in the business unit, according to a Korean-language ET News report.


Defects in the Galaxy S5's camera module, which is manufactured by Samsung's plants in Vietnam, also increased the purchasing department's dissatisfaction with the manufacturing department since Samsung's in-house-made components have no advantages in terms of quality or costs compared to those made by outside makers. However, the purchasing team still has pressure from the manufacturing team to give in-house products the priority, the report noted.


The head of the purchasing department JK Kim is considered an important right-hand man of Choi Gee-Sung, the head of Corporate Strategy at Samsung and former CEO, while the head of the manufacturing department Kim Jong-ho is a trusted subordinate of Lee Jae-yong, vice chairman of the company. The gradually rising internal conflict is expected to shake up Samsung's operations, which is run jointly by Choi and Lee, the report said.


In early July we reported that "Samsung Profits Plummet 24% on Slow Smartphone Sales." Any time a successful company begins to slide in the market, the corporate knives come out as executives try to protect their division's sales as in the case being reported on today.


Last week we posted a report titled "Angry Samsung Takes Back Billions in Bonuses from 100 Samsung Mobile Division Executives for Poor Performance." So today's news concerning infighting is a sign that the bonus cuts are having a negative effect on Samsung executives. And once that begins to permeate throughout the corporate ranks, paranoia sets in – and if it isn't contained, Samsung will go into a corporate tailspin. Not that it's happening today, but the signs of the company becoming unglued are beginning to surface and it's likely to get uglier before things return to normal.


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