Samsung Electronic Co announced on Thursday it intends to freeze the salaries of its employees based in South Korea as the smartphone maker struggles to cope with rising competition from Apple and low-cost Chinese rivals.
The technology giant said the freeze, its first in six years, is a part of a cost-cutting plan aimed at boosting the companys ability the compete with the latest iPhones and Xiaomis aggressive expansion. Additionally, Samsung is expected to unveil its new Galaxy device this weekend at the Mobile World Congress in Barcelona.
The announcement follows the companys first annual drop in earnings since 2011, after three consecutive quarters to December of falling sales and prices. The South Korean behemoth is feeling the pressure as more consumers switch to iOS powered devices, with Apple reporting record sales of the iPhone 6 and iPhone 6 plus in the last three months of 2014.
Since the last quarter, Samsung shares the top spot as the largest smartphone company in the world with Apple as both companies sold 74.5 million units, data issued by Strategy Analytics at the end of January showed.
However, the company has picked up a number of initiatives to spur growth, including the implementation of its own operating system and challenging Apple in the mobile payment segment.
Earlier this month Samsung acquired LoopPay, which makes smartphone accessories that enable its users to utilize their devices as digital wallets, as the company reaches for a bigger share of the fast developing and lucrative market.
Additionally, the company is trying to reduce its reliance on Google and its Android operating system, which powers the majority of Samsung smartphones via the development of its Tizen OS, which features in a number of other Samsung-made devices, including SmartTVs and smart watches.
The company launched its first smartphone equipped with the Tizen operating system last month in India. The device, dubbed Z1, reported sales above expectations, marking the first trial of the software successful.
With the implementation of its own software Samsung may trigger renewed interest towards its phones and lift the salary freeze, which would not affect performance incentives and bonuses.
Samsung is the countrys largest company and it is known for its high, but performance related salaries. Following disappointing results in the first two quarters of 2014, Samsung reduced the first-half bonuses of the senior managers at its mobile division by 25%.
Samsung lost 0.29% on Thursday and closed at ₩1 375 000 in Seoul, marking a one-year increase of 2.46%. The company is valued at ₩225.47 trillion.
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