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Samsung Combines Component Operations

Published on July 1, 2011
by Evan Ramstad and Jung-Ah Lee

Samsung Electronics Co. said Friday it will fold its flat-panel display business back into its semiconductor business, uniting its component manufacturing operations just when the display business appears likely to be unprofitable for some time to come.

The two operations last year accounted for 44 percent of Samsung’s revenue and 70 percent of its operating profits. But the display component business has been in a cyclical downturn and lost money in the first quarter and likely the second. The immediate effect of the combination will be to hide the display unit’s difficulties in the more strongly performing chip operation.

But the move also positions Samsung, the world’s largest technology manufacturer by revenue, to address a larger structural issue that executives rarely discuss: that the customers of its component businesses compete with the other divisions of Samsung, which make cellphones, TVs, computers and other consumer electronics gadgets. The strain of that issue recently became visible in relations with the biggest customer of its component divisions, Apple Inc., which in April sued Samsung alleging that its cellphone operation copied designs of Apple’s products.

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