Samsung Electronics' (005930.KS) formalization of an emergency management system for its Visual Display (VD) division shows that even its solid TV business, which has held the top spot for 19 consecutive years, now faces a difficult reality. Chinese firms are threatening Samsung TV's position from raw materials to the finished-product market, while the Trump-driven trade crisis that intensified early this year is clouding the outlook for the second half.
According to the industry Friday, the combined first-quarter operating profit of the VD division, which handles TVs and other products, and the Digital Appliances (DA) division was approximately 300 billion won. That represents a decline of about 40 percent from about 500 billion won in the same period last year. Although the figure includes losses at the DA division, which handles home appliances, some observers estimate that the VD division's operating profit fell slightly short of 1 trillion won. Even considering that the first quarter is typically the off-season for the TV business, a performance below 1 trillion won is seen as evidence of the difficult TV business.
Behind the deteriorating performance are weak TV demand and intensifying competition, but the liquid crystal display (LCD) supply chain structure controlled by Chinese firms also played a role. Early this year, the Trump-driven tariff policy overlapped with the Chinese government's support policy for TV and appliance purchases, raising the procurement cost of LCDs, a core component. According to market research firm TrendForce, in January this year the prices of LCD panels for 85-inch TVs and 75-inch panels rose by $4 and $3, respectively.
Supply chain risks are becoming more pronounced as China dominates the LCD supply chain. As Chinese panel makers artificially adjust factory utilization rates using holidays such as the Lunar New Year as a pretext, their production plans are dictating Samsung Electronics' cost structure.
The confidence built up by holding the No. 1 spot in the global TV market for 19 consecutive years is no longer what it once was. The global TV market share by revenue, which was 30.1 percent in 2023, fell to 28.3 percent last year. On a volume basis, the combined share of Chinese firms surpassed that of Korean firms, including Samsung Electronics, for the first time last year, heightening a sense of crisis within the company.
The continuation of the Trump-driven tariff policy variable, which emerged early this year, is also a burden. Samsung has production bases around the world, but relocating volumes entails costs such as facility investment. Noh Kyung-rae, vice president of Samsung Electronics' VD division, said at the first-quarter earnings announcement, "We expect uncertainties, including the impact of U.S. tariffs, to persist in the second quarter and the second half as well."
A Samsung Electronics official said, "In the decades I have worked at the company, I count only about two or three times that an emergency management system was declared," adding, "With various internal and external adversities overlapping, the sense of crisis within the company has risen to unprecedented levels."
