|In this January 2010 file photo, Samsung Group's Chairman Lee Kun-hee, center, appears at the company's booth at the Consumer Electronics Show held in Las Vegas along with his son Jae-yong, right. The chairman passed away Sunday at age 78. / Yonhap|
Achieving smooth transition key to success of new leadership for Samsung
By Baek Byung-yeul
|Late Samsung Group Chairman Lee Kun-hee|
Since Lee Kun-hee inherited control from his father, the group's founder Lee Byung-chull, in 1987, the late chairman established Samsung as a global giant of semiconductors, smartphones, TVs and home appliances.
Samsung Group said its annual revenue was less than 10 trillion won in 1987, but the figure grew to 386 trillion won as of 2018. The group's total market capitalization also increased by 396 times from 1 trillion won to 396 trillion won, according to the conglomerate.
With his death, it seems certain that Lee Jae-yong will inherit the throne of the country's largest conglomerate. Since the late chairman was hospitalized in 2014, the scion didn't assume the chairman title, but has performed as a de facto leader of the conglomerate.
Before Samsung Electronics established itself as one of the world's leading tech giants, industry officials and analysts said the late chairman's ambitious wake-up call in 1993 was the beginning of a long journey to the top.
Dubbed the New Management Initiative, the late chairman summoned the group's executives to Frankfurt, Germany, in 1993 and delivered his view that the emerging digital revolution would be a precious opportunity for Samsung to make a leap forward into a global leading tech company.
In order to achieve the goal, the late chairman ordered the executives to change their management system, saying "change everything except your wife and children." Since then, Samsung started to massively invest in research and development in digital technology, which consequently paved the way in building the renown of the group.
As Lee laid out a vision for Samsung and transformed the company from a no-name company to a pillar in digital technology, it remains to be seen whether the now vice chairman would contribute to drive Samsung's business growth and its leadership in the Fourth Industrial Revolution era.
Industry officials said the vice chairman has shown decisive leadership to help Samsung Electronics make a breakthrough whenever the tech giant has been at an inflection point requiring major changes.
In 2016, Lee decided to acquire U.S. automotive electronics company Harman for $8 billion in order to find a new growth engine in the rapidly growing connected car market.
The vice chairman also declared that it would make investments worth 180 trillion won ($160 billion), centering on improving its capability in sectors such as artificial intelligence (AI), fifth-generation networks (5G), biopharmaceutical and automotive electronics components, which will be of major significance in the Fourth Industrial Revolution era.
He also unveiled a business plan to become the global leading logic chip maker by 2030, by investing 133 trillion won to improve its competitiveness in System LSI (large-scale integration) and foundry businesses. While Samsung Electronics is the top memory chip maker, the company has lagged behind in the non-memory sector which accounts for about 70 percent of the entire semiconductor market.
While the global economy is struggling to overcome difficulties from the COVID-19 pandemic, Lee has been strengthening his on-site inspection activities this year, visiting the company's key plants located here and abroad. Earlier this month, Lee met with executives of chip equipment maker ASML in the Netherlands to strengthen the cooperative relationship with the Dutch firm, the only supplier for EUV-based lithography equipment which is vital for fabricating chips at the 7-nanometer node level and below.
Five days after returning from Europe, Lee departed for Vietnam to inspect an R&D center, which is under construction in the Vietnamese capital of Hanoi and the company's phone and display factories there.
Succession, governance overhaul
It also remains to be seen whether the Samsung heir can smoothly complete the management succession process. The vice chairman controls the conglomerate with a web-like ownership structure that links Samsung C&T, Samsung Life Insurance and Samsung Electronics.
For Lee, it is important to officially take control of the group's flagship Samsung Electronics. Among affiliates of the group, the late chairman held a 4.18 percent stake in Samsung Electronics, a 20.76 percent stake in Samsung Life Insurance and a 2.86 percent stake in Samsung C&T.
The group currently has a complex ownership structure with cross-holdings among affiliates, enabling the owner family to control the business with a very small stake in direct ownership. Specifically, the cross-holdings involve one group firm having a large equity stake in another. Samsung Life is the single largest shareholder of Samsung Electronics, and the insurer belongs to Samsung Group.
In May, the vice chairman already gave notice that he would lead the changes needed to bring the group's web-like holding structure in line with government regulations. However, the managerial succession is expected to take longer than expected as the vice chairman had been indicted by prosecutors for allegations regarding a controversial merger and accounting fraud. Currently, Lee faces a number of charges that include stock manipulation and violations of capital market laws and audit regulations.