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Samsung Says Appliance Sales to Increase 50% on Premium Strategy

Samsung Profit Surpasses Estimates as Galaxy Fends Off IPhone 5
A pedestrian walks past a Samsung Electronics Co. retail store in Yangon, Myanmar. Photographer: Dario Pignatelli/Bloomberg

Samsung Electronics Co., the world’s biggest seller of smartphones, TVs and display panels, expects sales of home appliances to climb 50 percent during the next three years as it focuses on premium models with more functions.

Annual revenue from the division making refrigerators, washing machines and ovens will climb to $18 billion in 2015 from about $12 billion last year, Younghoon Eom, executive vice president of sales and marketing, said in an interview in Las Vegas.

Spending on research and additional manufacturing capacity dragged operating margins for the appliance business below an industry average of about 5 percent, he said ahead of the Consumer Electronics Show. A focus on energy efficiency, more functionality and design will help the company boost sales and profitability as it competes against cheaper Chinese brands.

“They’re clearly a threat for us,” Eom said of competitors including Qindao, China-based Hisense Electric Co. and Haier Electronics Group Co., both of which are seeking to expand global sales. “We’ve been striving very hard at design innovation and performance improvement.”

Hisense and Haier were among the top sellers of home appliances in China last year under the country’s rural stimulus program, according to a statement on the Ministry of Commerce’s website.

‘Smart’ Refrigerator

Suwon, South Korea-based Samsung is making more “smart” appliances, or devices that can connect to each other or the Internet, Eom said. The company is “expanding aggressively” in the premium segment and reducing its emphasis on lower-priced products as it tries to boost operating margin above 5 percent by 2015, he said.

A smart washing machine could connect to a TV, allowing a viewer to monitor a wash cycle, while a refrigerator with a liquid-crystal-display monitor could connect to the Internet to find recipes or build a shopping list.

Only about 10 percent to 20 percent of Samsung’s home appliances will be smart by 2015, with most of the sales growth coming from improvements to existing features such as energy efficiency and time saving, Eom said.

“Today’s refrigerator is the same as a 100-years-ago refrigerator in terms of fundamental technology, washing machines are the same, air-conditioning systems are the same,” he said. “Most of our growth will come from the premium segment through innovation.”

The improvements include better temperature sensors, quieter designs and cosmetic refinements, said Kurt Jovais, the company’s U.S. vice president for home-appliance marketing.

Samsung’s appliances marketing budget in the U.S. will increase by about 5 percent this year as it focuses more on social media, Jovais said.

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