Samsung’s mobile division is the Samsung Group’s cash cow as it accounts for nearly 70 percent of the conglomerate’s revenues which is why people who work in this division are often envied by their colleagues in other Samsung divisions. They were the ones who usually got hefty salaries and bonuses as the Group handsomely rewarded them for lifting Samsung’s brand to new heights. Now the over 26,000 employees who work in this division are being deemed responsible for what’s possibly the worst crisis in the nearly five-decade history of Samsung Electronics. Employees reportedly describe a sense of gloom in the division as the entire Galaxy Note 7 episode has turned out to be tragic and sad.
Samsung Electronics is going to take a $5.3 billion hit on the Galaxy Note 7 and the division is likely to be held accountable. Employees often received bonuses there were around half of the base salary and they now believe that no bonuses might be doled out this year. Some senior executives are likely to be sent packing as well, even division head D.J. Koh, though Samsung hasn’t given any indication that heads will roll for the Galaxy Note 7 fiasco.
Samsung’s rapid success in the global mobile market contributed to the increasing influence of Samsung Electronics. The mobile division only accounted for 27 percent of its revenue in 2010 and the number surged to 61 percent in 2013. This led to a shift in dynamics at Samsung. Mobile division employees became big customers for other Samsung divisions as they bought copious amounts of chips, display panels and other components. Their attitudes reportedly changed too, with mobile division employees acting like bosses and pushing workers to meet tighter deadlines. They also used to have the upper hand in price negotiations. When bonuses were given out, many employees in other divisions grumbled among themselves that their colleagues got more even though mobile profits were coming down.
However, Samsung denies that its mobile unit became more powerful over other units. In a statement, the company said that “Samsung manages its supply chain based on fair and transparent policies and actively supports suppliers to establish mid- and long-term partnerships with them.”
Several employees mentioned in the report say that many are worried about who will be held responsible for the entire Galaxy Note 7 debacle. Workers just want it to be resolved so that they can go back to doing their jobs without having doubts about their position. They do say that this has pushed them to do some soul searching inside the company as it has been a very big and very expensive lesson for Samsung Electronics. There’s all the more reason for Samsung to ensure that something like this never happens again. “We are strongly committed to determining and addressing the cause and to taking any and all necessary steps to ensure this never happens again,” the company reiterated in a statement.
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