November 02, 2000 in Social Responsibility News

SAMSUNG SDI to Transfer the Color Filter Business

Samsung SDI announced that a resolution was passed to transfer the color filter business to Samsung Electronics at a meeting of the Board of Directors held at 2:00pm on October 27, 2000. The transfer will be finalized when Samsung Electronics' Board of Directors approves the transfer at a meeting scheduled for October 30, this year. Samsung SDI has decided to transfer the color filter business due to the difficulties involved in carrying out the TFT-LCD related business independently and to concentrate its resources on new businesses. Color filters are usually produced in-house by TFT-LCD manufacturers and it is difficult for a company to be in the color filter business separately. Samsung SDI has been shipping almost all of its color filters to Samsung Electronics and with an oversupply in the market it has been difficult to secure adequate profit. Cumulatively, the color filter business is still in the red and it only takes up 3~5% of revenues. Also with the large-scale TFT-LCD facility expansion by Taiwanese companies next year the competition is expected to increase and put a downward pressure on pricing, making it difficult to maintain profit levels. Moreover, as Samsung SDI is not in the TFT-LCD business the transfer of the color filter business is believed to be in the best interest of the company. From Samsung Electronics' perspective, the in-house production of color filters will significantly enhance its competitiveness. As the TFT-LCD is a core business for Samsung Electronics, the in-house production would reduce overhead and material costs as well as increase productivity through process streamlining. It will also enable concurrent engineering, which would shorten development time and increase efficiency. Based on these factors, the CEO of Samsung SDI and the CEO of Samsung Electronics have agreed to the transfer in principle and they strongly believe that it is a win-win strategy for both companies. The details of the transfer will be confirmed by going through fair and legally required procedures such as appraisal by a certified firm and approval by the Board of Directors. Samsung SDI is concerned that with the economic downturn and the bearish stock market many investors will view any changes negatively. Also, in regard to concerns over the possibility of unfair internal transactions or support between affiliated companies within the Samsung Group, the company emphasized that every effort is being made to maintain management transparency and accountability. Although Samsung Electronics is a major customer, the sales portion to Nokia, Motorola, Matsushita and Sharp is higher than the portion to Samsung Electronics. This illustrates the recognition of Samsung SDI's product quality and technological capability by the leading global companies. The CEO of Samsung SDI has always placed a strong emphasis on transparent decision-making. During the meeting of the Board of Directors on October 27, the directors thoroughly reviewed the fairness of the valuation as well as the rationale behind the transfer. Samsung SDI plans to invest the proceeds from the sale in new businesses and repay debt in order to strengthen financial stability. The company also stated that it would keep the promises it made at the beginning of the year. The first was to achieve profits that are on par with leading global companies and to maintain strong business performance. The third quarter results have been announced and the aftertax profit for the first nine months reached KRW 435.2bn, which is a twofold increase from the same period last year. Samsung SDI is confident of achieving the targets for 2000 that were promised during IR activities. The company also plans to maintain a high dividend payout ratio. The second was to push ahead with new businesses on schedule to secure future growth. Samsung SDI is currently aggressively executing the plans that have been set for new businesses. The PDPs that were displayed at the ASEM venue in mid-October received much praise. As for the rechargeable battery business, mass production started in June this year and the product quality is already on the same level as those of other leading makers. The company is also actively working on the commercialization of next next-generation products such as li-sulfur batteries, solar batteries and electric vehicle batteries. Moreover, the company is preparing for the joint-development and commercialization of OLED with a leading company and plans to establish a momentum for growth within the year. OLED is the most promising next next-generation display. The third was to implement continuous restructuring. Samsung SDI was able to overcome the economic difficulties and achieve record profits this year through restructuring efforts. Samsung SDI is continuously carrying out restructuring throughout all its business units and the transfer of the color filter business is a part of these activities. Fortified by restructuring efforts, the company is planning to set a higher performance target for next year despite expectations that business conditions will become more difficult. Samsung SDI is committed to setting aggressive goals and diligently executing the necessary plans to attain them. It plans to make every effort to enhance management transparency and achieve outstanding performance in the coming year.


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