Samsung LED, one of the industrial group’s underperforming affiliates, is expected to see many of its executives pack their bags amid speculation that the company will be merged with the semiconductor division. 

Among the 30 or so executives, nearly half are expected to be given the pink slip, industry sources told The Korea Herald. They said the decision was made following a recent group-wide audit at Samsung.

“Already, the LED executives are reporting to Kwon Oh-hyun,” said a source who declined to be identified. Kwon is the chief executive of Samsung’s semiconductor business.

The reshuffling will most likely come at the end of the year when Samsung conducts its annual personnel moves.

“There was a lot of talk during the audit about how to handle the underperforming divisions, such as the LED and LCD businesses,” the source said.

Samsung Electronics chairman Lee Kun-hee has hinted that a change is inevitable at Samsung due to unfavorable business conditions stemming from signs of a recession at both home and abroad.

Samsung LED is a joint venture between Samsung Electronics and Samsung Electro-Mechanics.

Samsung LED officials denied the reshuffling reports, saying there were no grounds for such a move. They also said that they were working to reverse the market situation, which they insisted was not as bad as some believe.

Meanwhile, industry sources predicted some of the heavyweight executives in other departments may be relocated as well, such as Kwon himself. He was in July named to the newly created Digital Solutions division that absorbed the embattled liquid crystal display department.

Up to one-third of the LCD executives including the CEO and vice president were removed in July on sluggish business conditions.

Industry watchers predicted that Kwon, who has been recognized for his contribution to the semiconductor sector growth in previous year, may be given a promotion to become a vice chairman of Samsung Electronics to work alongside of vice chairman Choi Gee-sung.

Deteriorating light-emitting diode market conditions amid sagging global and local economic conditions is the reportedly biggest reason behind Samsung’s decision to cut the LED executives and possibly merge the whole division with the semiconductor business.

Analysts believe Samsung LED will slip into the red for the third quarter of this year, mostly as LED sales have turned sluggish on dormant TV demand.

The division’s third quarter sales were expected to fall by more than 20 percent from the previous quarter, while operating profit would lose more than 80 percent, they said.

Samsung Mobile Display also may undergo reshuffling at the year’s end, the sources said.

The scope of resignations may not be as wide, but market watchers said there were too many executives at the division; there are about 50 executives at the company.

But more changes could come if the affiliate is merged with the LCD division ― that is, the LCD department would be absorbed by SMD. This means Kwon would wield even bigger power.

The reshuffling at SMD, however, would not be due to bad business since the division is avidly fostering the up-and-coming OLED technology, but rather simply to streamline the executive level as there seems to be too many considering the size of the business.

SMD became the first company in the world last year that started to mass produce OLED panels for mobile devices. Its sales for 2010 reached 4.46 trillion won, while operating profit stood at 327.2 billion won.

By Kim Ji-hyun (jemmie@heraldcorp.com)