A Physical Split of Samsung Electronics into Two Companies Amid Big Profit Difference in DS and DX?
There has been intensified discussions of a potential physical split of Samsung Electronics (005930 KS) into two companies.
A major dispute facing Samsung Electronics is the fact that its semiconductor business (DS unit; Device Solutions) is making so much more money than the other business units.
Despite this dispute, I think the most likely scenario is for Samsung Electronics to maintain its status quo and not split the company into two separate companies.
DS (semiconductor unit) accounted for 66% of total operating profit of Samsung Electronics in 1Q 2026. DX unit accounted for only 6% of the company in 1Q 2026.
Samsung Electronics 1Q 2026 Sales and Operating Profit Breakdown by Units (Source: Samsung Electronics)
Conclusion First
There has been intensified discussions of a potential physical split of Samsung Electronics (005930 KS) into two companies. A major dispute facing Samsung Electronics is the fact that its semiconductor business (DS unit; Device Solutions) is making so much more money than the other business units including DX (Device eXperience) unit which oversees the smartphone and home appliance businesses.
This has happened before in the past three decades. However, due to the sharply higher sales and profits at the semiconductor division driven by higher demand for AI related semiconductor chips, this difference in profit generation among its semiconductor versus other business units have widened much more than the previous years. Given the sharply higher sales and profits of the semiconductor unit in the next couple of years, this difference in profit generation is expected to expand even further in the next two years.
Despite this dispute, I think the most likely scenario is for Samsung Electronics to maintain its status quo and not split the company into two separate companies.
Although some of the employees at the Samsung Electronics’ semiconductor would like to split the company into two companies (since this could result in much higher pay for these employees), the overall positive impact to the entire shareholders of Samsung is less clear if it is split into two different corporations (especially in terms of valuations).
Three Key Considerations
A) Employees
So, there are three key considerations to take into consideration. First is the employees. The employees of Samsung’s semiconductor division believe they should be paid much higher bonuses (especially as compared to other Samsung employees in other units) since the semiconductor division generates most of the profits.
However, unlike SK Hynix (000660 KS) which generously shares a portion of the operating profit with its employees, the bonuses of Samsung Electronics’ employees are typically capped at much lower rates.
The employees that work at DX and other units (other than semiconductor) also want higher bonuses but realize that their divisions are not as profitable as the semiconductor unit so their bonuses are likely to be capped much more if Samsung decides to generously share the wealth of its exploding operating profit with its employees.
The militant trade labor union at Samsung Electronics is demanding performance bonuses equivalent to 15% of operating profit with no ceiling. Because most of the profit at Samsung Electronics is generated by the DS unit, if Samsung abides by this measure (albeit not 15% of operating profit but much lower than that), it would still mean the employees at the DS unit getting most of the performance bonuses.
B) Valuation
Second is valuation. If the DS and DX units are split up. It is not all clear whether that could result in higher valuations. The two companies that are considered closest comps to Samsung’s semiconductor unit include SK Hynix (000660 KS) and Micron Technology (MU US).
