Samsung Electronics is considering discontinuing some of its home appliances this year as part of an ongoing downsizing of its consumer electronics segment, as capital expenditures become increasingly concentrated in more profitable AI-related segments such as memory.

"The Digital Appliances [DA] division is considering exiting the stick vacuum cleaner, microwave and dishwasher businesses by the end of this year," said a source familiar with the matter. "Those product categories have relatively small market shares, and they have consistently generated weak profitability."

The DA unit produces a range of kitchen and laundry appliances such as refrigerators, dishwashers, washing machines, dryers, vacuum cleaners and air conditioners.

The move would mark a significant step beyond outsourcing, potentially leading to a full exit from the product categories as Samsung accelerates a portfolio reshuffle.

A company spokesperson declined to comment on the matter.

Profitability of the home appliance and Visual Display (VD) unit responsible for its television business has been dwindling for several years.

Another source with knowledge of the matter told the Korea JoongAng Daily that the timeline of the shutdown "will be soon" due to falling sales.

"The talks of a shutdown came from a business head," he said. "It won't be long now — sales are falling fast, by double digits, with every turning month."

The electronics maker is phasing out certain home appliances due to weakening demand and growing pressure from Chinese competitors that offer similar quality at more affordable prices.

In May, the company decided to halt TV and appliance sales in China. Due to widening losses, there have been reports that the company is considering outsourcing production for products such as dishwashers and microwaves, but this is the first time movement has been detected suggesting that the company will exit the business for some of its products altogether.

Korean sentiment toward Chinese electronics has become more positive compared to the past, especially among younger consumers, as their technological quality has improved, according to a survey done last year.

In a survey by Embrain Trend Monitor of 1,000 respondents, 1,615 said the technological capabilities of Chinese products have improved significantly in recent years. Notably, 58 percent said Chinese brands such as Xiaomi and Roborock, while not a complete substitute for Samsung and LG, have grown into competitive brands. In addition, six in 10 respondents said they had purchased Chinese home appliances before, in line with a recent consumption trend prioritizing practicality and efficiency. 

There was a time when the operating profit of the VD and DA unit overtook that of semiconductors, during the 2023 chip glut, but that was quickly reversed by the chip upcycle that followed, which has Samsung Electronics enjoying a heyday lately: The company logged record quarterly operating profit of 57.2 trillion won ($37.6 billion) between January and March, with the semiconductor division accounting for the majority of the total at 53.7 trillion won, while the VD and DA unit recorded only 200 billion won in operating profit.

The chip division also took the largest share of operating profit last year with 24.9 trillion won, while the VD and DA unit swung to the red, logging 200 billion won in operating losses. Analysts expect the unit to log similar losses this year.

The company has already been operating under emergency management for all nonchip divisions, including smartphones, TVs and home appliances — ironically, because the surge in semiconductor prices is squeezing profitability for consumer tech products.

With consumer devices like phones and appliances relying on memory chips, the same price hike that is boosting Samsung's own chip division is simultaneously raising production costs for its other products.

The dispute between the semiconductor division and the other units is intensifying as the profit disparity widens, leading to uneven bonus distribution.

Employees in the chip division are expected to receive bonuses worth up to 600 million won in stock next year, based on the wage negotiation deal reached between labor and management, creating a 100-fold bonus gap as other division employees are expected to receive only about 6 million won. A minority union consisting largely of nonchip employees has filed a suit, including an injunction to suspend the tentative agreement, arguing that the labor group was sidelined during the negotiation process even though the company's survival during the semiconductor downturn came on the back of consumer product units.

BY LEE JAE-LIM, PARK EUN-JEE [[email protected]]