After years of training, “Samsung Prince” Lee Jae-yong was finally appointed as the chairman of Samsung Electronics on Thursday, succeeding his father Lee Kun-hee. Lee Kun-hee’s death in 2020 left a vacancy, thereby ascending the tech giant’s pinnacle of power.
Lee Jae-yong has been the leader before as the vice chairman of Samsung Electronics. But now, as the undisputed No. 1 figure of Samsung Electronics, Lee Jae-yong is also worthy of the name to assume full responsibility for the company.
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As we all know, Samsung Electronics is the most dominant company in South Korea. Together with the wider business covered by the entire Samsung Group, Samsung plays such a crucial role in South Korea that it is called the “Samsung Republic”.
As a third-generation business tycoon, Jae-yong Lee has little time to shuffle through the spotlight as he faces challenges ranging from a slump in the semiconductor industry to the latest legal battle plaguing the company while scrambling to fend off business challengers.
Overcoming the downturn in the chip business
Global semiconductor makers are grappling with sluggish demand for their products amid rising inflation and a slowing economy, and Samsung is no exception. Samsung Electronics, the world’s largest memory chip maker, said Thursday that operating profit from its semiconductor unit halved in the third quarter from a year earlier to 5.1 trillion won ($3.6 billion).
But Samsung Electronics said the company would not cut production of DRAM and NAND memory chips and expected demand to rebound in the medium to long term. But it also means that lower chip prices will continue to dent the company’s profits for at least the next few quarters.
In addition, Samsung must fend off challengers in other business areas, such as smartphones. Mobile phone makers have already indicated that they plan to surpass Samsung to become the world’s largest smartphone maker (based on shipments) in the next few years.
Find new growth points
Currently, Samsung Electronics is looking for new growth areas. Under Lee’s leadership, Samsung Electronics has invested billions of dollars in biotechnology in recent years. He also took a tour of Samsung Biologics’ newly opened fourth factory in Incheon earlier this month, signaling his interest in the business.
In the third quarter, Samsung Bio’s operating profit doubled year-on-year to 3.2 trillion won, equivalent to 60% of Samsung Electronics’ chip division’s operating profit. Right now, the business is growing rapidly, but not yet at the same level as Samsung’s other tech businesses.
In addition, Samsung Electronics has also invested in the electric vehicle battery business through its subsidiary Samsung SDI. In the third quarter, Samsung SDI’s operating profit rose 52% year-on-year, but its global market share was about 5%, behind market leaders such as CATL, LG Energy Solution, and Panasonic.
Ongoing Legal Issues
Like many South Korean conglomerates, Samsung has been plagued by legal problems for decades. Lee Jae-yong, who previously spent a year and a half in prison for bribery, was pardoned by the president earlier this year and has been welcomed by the South Korean business community.
In addition, Lee faces another legal battle as South Korean prosecutors accuse him of stock market manipulation and accounting in the 2015 merger of Cheil Industries and Samsung C&T Fraud.
The case is currently pending in a Seoul court, with a ruling expected next year. Lawyers for Lee Jae-yong denied prosecutors’ allegations in court, saying the deal was legal. While the trial continues, Lee’s move to now become the company’s top leader may show he is confident in the outcome, experts said.
Advocating a new “Samsung Spirit”
Experts say Lee needs to update the company’s core values, as his father did in the 1990s, and build a new management team focused on quality.
A former Samsung executive said Lee had to show his unique vision. “He should show how he can lead Samsung by coming up with new ethos or values,” the former executive said.
In a letter to employees on Thursday, Lee laid out the current challenges facing the company.
He said: “There is no doubt that we are at a critical moment. But for us at Samsung, this is nothing new. We have always faced obstacles and fought against them. Now is the time to plan our next move. , now is the time to act, to be bold and unwavering in our areas of focus.”
Globalization of Financial Business
Samsung also operates a range of financial businesses, from insurance to securities to asset management. But analysts say Samsung is only a player in South Korea’s domestic market and lacks plans to go global.
Jae-yong Lee considered selling Samsung Life Insurance to Warren Buffett but later decided to stay in business, according to court documents and testimony.
Experts say Lee should consider how to grow his financial business quickly and compete in the international market. Currently, the company’s financial business lags even homegrown South Korean companies such as Mirae Asset.