The pullback comes on the heels of Dutch rival Philips' recent
decision to spin off its century-old lighting business. Price wars
have slashed profitability to levels deemed too unattractive in the
long run, despite an LED boom that has upended the global
incandescent lighting industry.
Analysts say Samsung Electronics' retreat reflects the growing
competition from Chinese manufacturers even as demand for LED
lighting remains strong. LED lamps last 10 times longer than
fluorescent bulbs and 100 times longer than traditional incandescent
tungsten filament bulbs.
"It appears that Samsung decided to fold the business because price
competition was so fierce and there was not a lot of room for growth
going forward," said Seoul-based IM Investment analyst Lee Min-hee.
Philips said in September that it will spin off its lighting
business to expand its higher-margin healthcare and consumer
divisions. Two month earlier, Germany's Osram Licht AG, which also
makes LED lights, announced a cost-cutting plan that included nearly
8,000 job cuts.
A spokeswoman at Samsung Electronics said revenue contribution from
the business was small but did not comment on specifics, including
how much Samsung had invested.
"We will remain active in the LED industry through our LED component
business," Samsung Electronics said in an emailed statement, adding
that it will focus on areas such as backlighting for displays of
consumer products like televisions.
Samsung's decision also underscores the challenges faced by the
company and the wider Samsung Group in nurturing new growth drivers.
Samsung Electronics is battling falling profits in its smartphone
business, the world's largest, and group patriarch Lee Kun-hee has
been hospitalized since a May heart attack.
In 2010, Samsung Group identified LED, rechargeable cells for hybrid
electric cars, solar cells, medical devices and biopharmaceuticals
as new growth drivers for the conglomerate and tipped them to
generate 50 trillion won ($47.5 billion) in annual revenues by 2020
for its affiliates.
But the conglomerate has yet gain traction in most of these
businesses. Though Samsung SDI Co Ltd is supplying German
premium automaker BMW with electric vehicle battery cells, other
businesses have yet to show significant revenue growth.
[to top of second column]
SEARCH FOR GROWTH
Identifying and developing new growth drivers will be a key test for
Jay Y. Lee when he takes the reins at the group from his father.
Some media reports have speculated that Samsung may also pull back
from the solar business. A Samsung SDI spokesman said the firm
continues research and development in the sector, but analysts say
the recent decline in oil prices and the entry of Chinese players
have hurt the outlook.
"These moves also give us a small glimpse of Jay Y. Lee's management
style, with him now at the helm for five months," said Park Ju-gun,
head of corporate watchdog CEO Score.
"He's moving away from businesses like solar and LED lighting and
seem to be putting more resources in software or platform-oriented
businesses," he said, noting that Samsung Electronics' acquisition
of home automation startup SmartThings in August as well as Lee's
recent meeting with Facebook Inc CEO Mark Zuckerberg in Seoul.
Samsung Electronics shares ended 1.5 percent lower on Monday,
underperforming a 0.3 percent rise for the broader market, but
showed muted reaction to the LED lighting exit.
(1 US dollar = 1,052.6100 Korean won)
(Editing by Ryan Woo and Tony Munroe)
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