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[News Focus] Samsung viewing current situation as ‘new crisis’

Tech giant faced again with ownership risks amid aggravating semiconductor and smartphone market conditions, product quality issues

Understanding the latest circumstances as a “new crisis” phase for Samsung Electronics, the top conglomerate in Korea appears to be seeking measures to tackle a series of challenges looming large over the tech giant, according to industry sources Monday.

The sense of urgency within Samsung has been felt across the business community, as recent remarks made by Vice Chairman and heir apparent Lee Jae-yong went public.

On Saturday, Lee appeared in the lobby of Samsung’s semiconductors headquarters in Hwaseong, Gyeonggi Province, to discuss the company’s investment and employment plans with top management of the chipmaking unit.

According to Samsung, during the four-hour meeting the vice chairman emphasized, “Samsung should not be satisfied with or disappointed by short-term outcomes and opportunities, and what we shouldn’t give up amid a fast-changing environment is long-term and fundamental technological prowess.”

Lee then urged the top management to execute plans to invest 180 trillion won ($153 billion) and hire 40,000 employees over three years “without shaking (failure).”

Such a meeting held by Lee marked the first since he started leading the group on behalf of his father, Chairman Lee Kun-hee, who was hospitalized in May 2014.

“The latest remark is considered the strongest made by the vice chairman, which suggests that the current situation involving Samsung is grave, and is a new crisis,” a Samsung official said. 

Samsung heir Lee Jae-yong (second from left) walks into the semicondcutor headquarters of Samsung Electronics in Hwaseong, Gyeonggi Province, on Saturday. (Samsung Electronics)
Samsung heir Lee Jae-yong (second from left) walks into the semicondcutor headquarters of Samsung Electronics in Hwaseong, Gyeonggi Province, on Saturday. (Samsung Electronics)

Samsung is facing numerous challenges both at home and abroad.

As the global memory chip market has entered a downward cycle, seeing falling prices and delayed shipments, Samsung’s semiconductors business is forecast to report declines in quarterly operating profits throughout the year. The company’s first-quarter operating profit plunged 60 percent on-year to 6.23 trillion won, marking its smallest profit in 10 quarters.

Growing uncertainty in the global business environment, including the ongoing trade conflicts between the United States and China is also a major concern for Samsung. China’s Huawei is both a rival of and partner to Samsung.

Lee asked former US President George W. Bush for advice on the global trade issue during his visit to Korea last month.

Samsung’s latest debacle with the Galaxy Fold smartphone is another challenge that is adding pressures on the tech titan amid a sluggish market for high-end smartphones.

Its first foldable display device surprised the world in February when it was first presented, but was later mocked for its display defects found by some US reviewers. The launch was postponed in April, and it is still not ready to be rolled out.

Aside from business challenges, Samsung is again facing ownership risks involving the vice chairman’s inheritance preparation.

Samsung heir Lee is facing accusations from prosecutors on his role in the unfair merger of Samsung C&T and Cheil Industries in 2015, as well as in accounting fraud at Samsung BioLogics for its initial public offering in 2016. Both incidents have been viewed as part of an illegal process of transferring group control from Chairman Lee to his son.

“Lee’s words highlight that Samsung is undergoing a hard time again,” said an official from the business community. “Samsung insiders say the atmosphere is as bad as it was when Lee was held in jail (in 2017) due to the presidential bribery scandal.” 

By Song Su-hyun (