Samsung’s consumer-products CEO expects the tech decline to continue until 2023

While the decline in demand poses continued challenges for the company, Samsung plans to strengthen connected devices and related software to meet current market challenges, he said, having previously lagged behind rivals such as Apple. Inc.

“Difficulty often creates new opportunities. When everything is stable, it’s hard to disrupt the market order,” Mr. Hahn told The Wall Street Journal in his first media interview since taking the positions 14 months ago.

Macroeconomic challenges hit Samsung hard in the early stages of the pandemic, as companies and consumers cut spending on electronics. This has led to a sharp drop in demand for goods made by Samsung, the world’s largest maker of smartphones, TVs and semiconductors.

Samsung’s profit for the quarter ended Dec. 31 is likely to halve from a year earlier, according to analysts polled by data provider FactSet..

The company will report first earnings on Friday.

Memory chips, Samsung’s main source of revenue, have been hit by supply shortages, while global shipments of smartphones and other electronic goods have slowed.

Mr. Han, a veteran of Samsung’s television business, took over the leadership of the company’s newly integrated smartphone and consumer-electronics division in December 2021 and has made a series of changes. Samsung’s other CEO, Kyung Ki-hyun, heads the semiconductors and components division.

For years, Samsung employees from various consumer technology business units often worked in silos and were motivated to prioritize the needs of their own business units—a process that spurred internal competition but hindered efforts to develop products that could work seamlessly with each. other. Now, Mr. Hahn said, “What’s the best tool and method to enable a connected feature in the most effortless, user-friendly way?” They are aligned under the single goal of

Samsung has created a new umbrella group that will work with employees from each product division to improve the user experience across multiple devices, Mr. Han said. The team’s office includes real homes and rooms where connected devices can be tested and, in many cases, built-in rooms.

Mr. Hahn said the goal is to make Samsung and its partner brands’ devices work as seamlessly as possible: to have the technology run quietly in the background, something he calls “quiet technology.”

Currently, Samsung smartphone users can turn on the music on the Samsung TV to complete the loop when they get home, and the stereo will automatically turn on with the beat. A user can scan the barcode on a package of frozen hot dogs using a smartphone, and the Samsung microwave will heat the item according to instructions.

If Mr Han’s bet is successful, Samsung’s line-up of phones, TVs and home appliances will help boost consumer demand and brand loyalty as it fends off growing competition from rivals, said Dylan Patel, chief analyst at technology industry consultancy SemiAnalysis. Be firm. Samsung sells nearly half a billion devices worldwide every year.

Analysts say it’s becoming increasingly difficult to differentiate smartphones solely by new device features and high-end specifications, driving up the cost of integrating multiple devices and service offerings that enhance the user experience.

This is an area where Samsung has struggled in the past, former and current executives said. While the company stands out for its strength in hardware, it has struggled in past efforts to develop robust services and software capabilities to increase the use of its products, he said.

In recent years, Samsung has battled rival Apple to defend its share of the premium smartphone market, where most of the industry’s profits come from. Apple has built an ecosystem of unique connected products and services that help attract new consumers and retain customers.

If Samsung can successfully develop an Apple-like ecosystem of well-connected devices and services, Samsung could double the profit margins of its consumer technology business in the long term, said Neil Mauston, managing director of the international wireless practice at Tech Insights Inc.

Today, Samsung leads the global smartphone market by total shipments, but Apple dominates the premium smartphone market. Over the past two years, Apple’s market share has risen 10 percentage points to 77 percent at a price above $600, while Samsung’s has fallen 5 percent to 16 percent, according to Counterpoint Research. Technology Market Researcher.

Samsung also faces stiff competition from Chinese smartphone makers, whose value-for-money gadgets appeal to consumers in the low- and mid-end markets. Samsung’s global smartphone operating profit margin is estimated to have shrunk from 23% to 10%, largely due to competition from Chinese brands, according to Tech Insights.

While geopolitical uncertainties and China’s Covid-19 lockdowns have disrupted supply chains for global manufacturers such as Apple, Mr Han stressed that Samsung is still strong after making adjustments throughout the pandemic. At one point, the company switched logistics routes to ensure that a factory in Mexico that previously only produced products for the US market could supply products to Europe when needed.

Samsung’s factories are spread across several locations, with four smartphone production sites in South Korea, Vietnam, India and Brazil, as well as home appliance factories in 10 locations worldwide.

Write to Jiyoung Sohn at jiyoung.sohn@wsj.com