At crisis-hit Samsung,
nerves jangle as annual review looms
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[October 19, 2016]
By Se Young Lee
SEOUL
(Reuters) - The next few weeks are traditionally a tense time at Samsung
Electronics Co <005930.KS> as executives wait to see if their work over
the year is rewarded with promotion at the South Korean firm's annual
performance review.
This year, that tension has been ramped up several notches as the
year-end ritual comes on the heels of the debacle over Samsung's
flagship Galaxy Note 7 smartphone.
The world's top smartphone maker this month pulled the plug on the
near-$900 device after phones overheated and caught fire. With some
replacement phones suffering the same problem, Samsung has forecast a
$5.4 billion hit to its operating profits. Some analysts predict the
smartphone business may post a first quarterly loss for July-September.
"Everyone's afraid to be heard even breathing," said one Samsung
employee. "There will be punitive measures; someone will have to take
responsibility for this."
None of the Samsung employees Reuters talked to for this article wanted
to be named as they were not authorized to speak to the media.
Samsung's annual personnel decisions - a common practice in South Korea
around December - is a secret more closely guarded than even details of
its new products. Executives are told about any changes only at the last
minute.
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Samsung insiders say there is more nervousness this year than normal,
and talk internally of sweeping changes, with a cull both in the
executive suite and on the ground level.
"There's a lot of talk there could be major turnover in the executive
ranks on the hardware side," said an insider at the mobile division.
"There's also a lot of concern among the working-level employees about a
major restructuring."
Samsung told Reuters it was not considering any management changes or
restructuring in response to the Note 7 crisis.
FRUSTRATION
The sense of frustration among Samsung staff has been heightened by the
company's inability to find the cause of the fires in replacement Note
7s that began shipping last month with what Samsung said were safe
batteries, insiders said.
"We are working around the clock to analyze the causes of the reported
cases," Samsung said in a statement to Reuters, adding it is premature
to speculate on what went wrong.
In an internal Oct. 11 email apologizing to staff, mobile chief Koh
Dong-jin - who has been in the job for less than a year - wrote of the
"big wound" the scrapping of the Note 7 would be for executives and
employees. Samsung confirmed Koh wrote to staff, but did not comment on
what he said.
Some Samsung workers said there were already rumors circulating
internally about which executives might be ousted. Some investors and
analysts have said top executives including Koh may be held responsible
at the year-end review.
Others said they felt ashamed when people they know ditched the Note 7
for a rival product or when they heard news announcements about the
phones being banned from aeroplanes.
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The logo of Samsung Electronic is seen at its headquarters in Seoul,
South Korea, July 4, 2016. REUTERS/Kim Hong-Ji/File Photo
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Koh
and other Samsung executives have been active on internal messaging boards,
discussing with employees how to deal with the Note 7 crisis, insiders said.
About
70 percent of Samsung's more than 325,000 employees work outside South Korea. It
is not clear how overseas jobs or those at subsidiaries might be affected by the
Note 7 storm; Samsung said it has no plans to cut jobs this year in Vietnam, a
major smartphone manufacturing base.
TAKING IT SLOW
Internally, the mobile business was criticized by some for changing product
specifications without delaying launch schedules, putting staff and suppliers
under pressure to deliver fast.
"Some people who work in other business divisions feel something like this was
bound to happen," said a Samsung employee at the consumer electronics division,
noting mounting pressure on the mobile business to overcome slowing growth amid
strong competition from rivals including Apple Inc <AAPL.O> and Huawei
Technologies Co Ltd [HWT.UL].
A
person familiar with the development of the next Galaxy S smartphone, expected
to launch early next year, said the process has now slowed as Samsung is anxious
to avoid any repeat of the Note 7 problems in its future premium handsets.
"Depending on the cause (of the Note 7 problem), certain configurations may need
to be altered," the person said. "So the specifics for the (next) phone have not
been finalised."
Samsung is not likely to bring forward the launch of the next Galaxy S
smartphone to make up for lost Note 7 sales, the person added.
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Samsung told Reuters it will take "any and all necessary steps" to ensure
product safety, but did not comment on whether the Note 7 fallout was affecting
the next Galaxy S phone's development.
($1 = 1,114.7500 won)
(Reporting by Se Young Lee, with additional reporting by Cynthia Kim and Hyunjoo
Jin; Editing by Ian Geoghegan)
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