Samsung Electronics' office building in Seoul (Newsis)

Samsung Electronics, facing challenges from its smaller rivals, is expected to carry out a major personnel reshuffle later this year, according to industry sources Monday.

The world’s largest maker of memory chips and smartphones has been battling growing competition at home and abroad. When it comes to artificial intelligence chips, for instance, it has been outpaced by its crosstown rival SK hynix, as it failed to secure an earlier edge.

“Samsung’s losses in HBM and foundry are just too bad, and wrong decisions made by executives are viewed as one of the leading causes for the current struggle,” said Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University.

"In this year’s year-end personnel reshuffle, Samsung is expected to stick to meritocratic principles. Rumors suggest that around 30 percent of the executives may face cuts.”

Amid sluggish chip sales, Samsung replaced its chip head with an industry veteran, Vice Chairman Jun Young-hyun, in a surprise appointment in May.

Sources say the chip business division is expected to undergo another round of restructuring following the leadership change.

Earlier this month, Jun issued a rare apology for weaker-than-expected earnings and hinted at a drastic overhaul in personnel and corporate structure.

“Many of you speak of Samsung’s crisis. Entire responsibility lies on us leading the businesses,” Jun said in a statement, adding that the company’s leadership will come to the fore to overcome the challenges.

President Choi Si-young, the foundry chief, and President Park Yong-in, the logic-chip head, are also cited as possibly facing replacement in the year-end executive reshuffle as their divisions also reported operational losses.

The company’s boardroom is no exception. Three out of the four internal directors will see their term expire in the first half of next year. They include Chief Financial Officer Park Hark-kyu, the mobile business chief Roh Tae-moon, and Lee Jung-bae, another top executive at the memory chip business.

As of the second quarter, Samsung's semiconductor business division had 438 executives, accounting for 38 percent of the total 1164 executives. The figure is more than double that of SK hynix, which has 199 executives.

Experts said the company should also restructure the corporate culture that is heavily focused on executive performance and immediate results, often at the expense of long-term advancement. This hinders the company from achieving the necessary production scalability.

“Securing technical leadership should be a priority for Samsung. Here, technical leadership refers to the product’s yield,” Lee of Sangmyung University said.

“Because the executives need to prove their performance right away, they make decisions for short-term benefits. Engineers come up with new developments without considering the yield rates, and when only 20 out of 100 units function properly, it cannot be called a successful development.”

Hwang Yong-sik, a professor from Sejong University College of Business and Economics, underscored that the company should give more power to engineers and appoint strategists to steer the company in the right direction.

“In the past, Samsung was focused on creating a favorable environment for engineers. Now, it is important the company find the right direction through the synergy created between engineers and strategists," Hwang said, acknowledging employees' complaints about decisions made by financial experts focused on reducing financial losses.

By Jo He-rim (herim@heraldcorp.com)