Ex-Con Lee Jae-Yong Becomes Samsung Chairman – Here Are Five Challenges He’ll Face

South Korean manufacturing giant Samsung has a new chairman following the death of Lee Kun-hee. However, its new chairman is a former prisoner. Samsung’s new chairman, Lee Jae-yong, was convicted in 2017 of “bribery, embezzlement, illegal transfer of assets abroad, concealment of proceeds of crime and perjury.” He was found guilty of bribing former South Korean President Park Geun-hye. The bribe was for the company to gain favor in a merger deal. After years of training, the “Prince of Samsung” Lee Jae-yong has finally been appointed chairman of Samsung Electronics. He succeeds his father, Lee Kun Hee, who passed away two years ago. Lee Kun-hee’s death in 2020 left a vacancy, thereby rising to the top of the tech giant’s power.

Lee Jae-Yong, 54, was the de facto leader previously as vice president of Samsung Electronics. But now, as the undisputed number 1 figure of Samsung Electronics, Lee Jae-Yong is also worthy of the name to take full responsibility for the company. As we all know, Samsung Electronics is the most dominant company in South Korea. The Samsung Group is so large that some refer to South Korea as the “Samsung Republic”. The company covers a wide range of businesses throughout Korea. This explains the nickname “Samsung Republic”.

As a third-generation business tycoon, Lee Jae-Yong doesn’t have much time to bask in the limelight. He is currently facing many challenges. There is currently a downturn in the semiconductor industry. He will have to deal with this immediately. Plus, there’s a new legal battle plaguing the company. In addition, he will also have to fight to fend off business challenges.

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. Samsung is no exception. Samsung Electronics is the largest manufacturer of memory chips in the world. Operating profit at 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 will not cut production of DRAM and NAND memory chips. It expects demand to recover in the medium to long term. But it also means lower chip prices will continue to weigh on the company’s earnings for at least the next few quarters. Samsung also needs to fend off rivals in other business areas, such as smartphones. Samsung is currently the largest smartphone manufacturer in the world. However, the competition is at Samsung’s neck.

Find new growth points

Samsung Electronics is currently looking for new areas for growth. Under Lee’s leadership, Samsung Electronics invested billions of dollars in biotechnology. He also toured Samsung Biologics’ newly opened fourth factory in Incheon. This suggests that he has a keen interest in the business.

In the third quarter, Samsung Bio’s operating profit doubled year-on-year to 3.2 trillion won. That equates to 60% of Samsung Electronics’ chip division’s operating profit. The business is currently growing rapidly. However, it is still not at the same level as Samsung’s other technology businesses. In addition, Samsung Electronics is also investing in the electric vehicle battery business. It did this through its subsidiary Samsung SDI. In the third quarter, Samsung SDI’s operating profit rose 52% year-on-year. However, its global market share is around 5%. It is behind market leaders such as CATL, LG Energy Solution and Panasonic.

Current 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. He is now welcomed by the South Korean business community. Lee also faces another legal battle as South Korean prosecutors accuse him of stock market manipulation. It is in the 2015 merger of Cheil Industries and Samsung C&T Fraud.

The case is currently pending in a court in Seoul, with a decision expected next year. Lee Jae-Yong’s lawyers rejected the prosecutors’ accusations in court, saying the deal was legal. As the process continues, Lee’s move to become the company’s top leader may indicate he is confident in the outcome.

Protection of new “Samsung Spirit”

Experts say Lee needs to update the company’s core values, as his father did in the 1990s. He also needs to build a new management team focused on quality. A former Samsung executive said Lee needed to show his unique vision. “He needs to show how he can lead Samsung by coming up with a new ethos or values,” says the former executive.

In a letter to employees, Lee outlined the company’s current challenges. He said: “There is no doubt that we are at a critical juncture. But for us at Samsung, this is nothing new. We have faced obstacles and fought through 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 manages a range of financial activities, from insurance to securities to asset management. But analysts say Samsung is only a player in South Korea’s domestic market. The company also has no plans for global expansion. According to court documents and testimony, Lee considered selling Samsung Life Insurance to Warren Buffett. However, he later decided to stay in business. Experts say Lee needs to consider how to quickly grow his financial business and compete in the international market. Currently, the company’s financial business lags behind even local South Korean companies such as Mirae Asset.