Ex-convict Lee Jae-Yong becomes Samsung’s chairman – here are five challenges he will face

Ex-convict Lee Jae-Yong becomes Samsung’s chairman – here are five challenges he will face

South Korean manufacturing large, Samsung, has a brand new chairman after the loss of life of Lee Kun-hee. Nevertheless, its new chairman is an ex-convict. Samsung’s new chairman, Lee Jae-Yong was convicted in 2017 for “bribery, embezzlement, illegally shifting property abroad, concealing felony proceeds and perjury”. He was discovered responsible of bribing South Korea’s former president Park Geun-Hye. The bribery was for the corporate to get favour in a merger deal. After years of coaching, “Samsung Prince” Lee Jae-Yong was lastly appointed because the chairman of Samsung Electronics. He succeeds his father Lee Kun-hee who died two years in the past. Lee Kun-hee’s loss of life in 2020 left a emptiness, thereby ascending the tech large’s pinnacle of energy.

Lee Jae-Yong, 54, has been the de facto chief earlier than because the vice chairman of Samsung Electronics. However now, because the undisputed No. 1 determine of Samsung Electronics, Lee Jae-Yong can be worthy of the title to imagine full duty for the corporate. As everyone knows, Samsung Electronics is essentially the most dominant firm in South Korea. Samsung Group is so massive that some name South Korea the “Samsung Republic”. The corporate covers a variety of companies all through Korea. This explains the nickname “Samsung Republic”.

As a third-generation enterprise tycoon, Lee Jae-Yong has little time to shuffle via the highlight. In the intervening time, he’s going through numerous challenges. There may be at present a stoop within the semiconductor trade. He must take care of this instantly. Additionally, there’s a new authorized battle plaguing the corporate. As well as, he will even must scramble to fend off enterprise challengers.

Overcoming the downturn within the chip enterprise

World semiconductor makers are grappling with sluggish demand for his or her merchandise amid rising inflation and a slowing economic system. Samsung is not any exception. Samsung Electronics is the world’s largest reminiscence chip maker. The working revenue from its semiconductor unit halved within the third quarter from a yr earlier to five.1 trillion gained ($3.6 billion).

However Samsung Electronics stated the corporate wouldn’t reduce manufacturing of DRAM and NAND reminiscence chips. It expects demand to rebound within the medium to long run. However it additionally implies that decrease chip costs will proceed to dent the corporate’s earnings for a minimum of the following few quarters. As well as, Samsung should fend off challengers in different enterprise areas, corresponding to smartphones. In the intervening time, Samsung is the world’s largest smartphone maker. Nevertheless, the competitors is on Samsung’s neck.

Discover new progress factors

At present, Samsung Electronics is in search of new progress areas. Beneath Lee’s management, Samsung Electronics has invested billions of {dollars} in biotechnology. He additionally took a tour of Samsung Biologics’ newly opened fourth manufacturing facility in Incheon. This implies that he has fairly an curiosity within the enterprise.

Within the third quarter, Samsung Bio’s working revenue doubled year-on-year to three.2 trillion gained. That is equal to 60% of Samsung Electronics’ chip division’s working revenue. Proper now, the enterprise is rising quickly. Nevertheless, it isn’t but on the similar degree as Samsung’s different tech companies. As well as, Samsung Electronics has additionally invested within the electrical car battery enterprise. It did this via its subsidiary, Samsung SDI. Within the third quarter, Samsung SDI’s working revenue rose 52% year-on-year. Nevertheless, its international market share was about 5%. It’s behind market leaders corresponding to CATL, LG Power Answer and Panasonic.

Ongoing Authorized Points

Like many South Korean conglomerates, Samsung has been stricken by authorized issues for many years. Lee Jae-Yong, who beforehand spent a yr and a half in jail for bribery, was pardoned by the president earlier this yr. He has now been welcomed by the South Korean enterprise neighborhood. As well as, Lee faces one other authorized battle as South Korean prosecutors accuse him of inventory market manipulation. That is within the 2015 merger of Cheil Industries and Samsung C&T Fraud.

The case is at present pending in a Seoul courtroom, with a ruling anticipated subsequent yr. Legal professionals for Lee Jae-Yong denied prosecutors’ allegations in courtroom, saying the deal was authorized. Whereas the trial continues, Lee’s transfer to now develop into the corporate’s prime chief could present he’s assured within the consequence.

Advocating a brand new “Samsung Spirit”

Specialists say Lee must replace the corporate’s core values, as his father did within the 1990s, He additionally must construct a brand new administration crew centered on high quality. A former Samsung govt stated Lee needed to present his distinctive imaginative and prescient. “He ought to present how he can lead Samsung by arising with new ethos or values,” the previous govt says.

In a letter to staff, Lee laid out the present challenges going through the corporate. He stated: “There isn’t a doubt that we’re at a crucial second. However for us at Samsung, that is nothing new. We’ve got been going through obstacles and preventing them. Now’s the time to plan our subsequent transfer, now’s the time to behave, to be daring and unwavering in our areas of focus.”

Globalization of Monetary Enterprise

Samsung additionally operates a variety of economic companies, from insurance coverage to securities to asset administration. However analysts say Samsung is just a participant in South Korea’s home market. The corporate additionally lacks plans to go international. In response to courtroom paperwork and testimony, Lee thought of promoting Samsung Life Insurance coverage to Warren Buffett. Nevertheless, he later determined to remain in enterprise. Specialists say Lee ought to take into account the right way to develop his monetary enterprise shortly and compete within the worldwide market. At present, the corporate’s monetary enterprise lags behind even homegrown South Korean firms corresponding to Mirae Asset.