Until recently, South Korea was often called “the Republic of Samsung.” Accounting for nearly 20 percent of the country’s total exports, Samsung Group dominated industries ranging from electronics and finance to construction. SK Group, on the other hand, was a distant second or third in terms of economic influence. Yet, in just a few years, their fortunes have reversed dramatically. Although Samsung remains Korea’s largest conglomerate, its performance has stagnated in recent years, while SK has surged ahead, becoming a close second and challenging Samsung in key business areas.
The most striking example of this shift is the dismal decline of Samsung Electronics, the group’s flagship company, and the astonishing ascent of SK hynix, SK Group’s primary profit driver. Last year, SK’s operating profit in the semiconductor sector surpassed Samsung’s for the first time. While Samsung Electronics still posted a higher overall operating profit due to its mobile phone and home appliance divisions, which SK lacks, analysts predict that the two companies’ total earnings will soon be neck and neck. Reflecting this trend, Samsung Electronics’ stock price fell 28 percent last year, while SK hynix’s soared by 60 percent.
What caused this dramatic shift? Analysts point to the starkly different trajectories of the two groups’ leaders over the past decade. While Samsung Chair Lee Jae-yong was entangled in legal battles that hindered timely investment decisions, SK Chair Chey Tae-won was able to make bold investments in future-focused business areas — most notably, high bandwidth memory semiconductors for artificial intelligence. As demand for high-value AI chips skyrockets, SK hynix has reaped enormous profits. Meanwhile, Samsung remains reliant on older-generation semiconductors that yield significantly lower margins, leaving it lagging behind SK in AI chip development. For instance, Nvidia, a global leader in AI technology, purchases large quantities of HBM from SK but not from Samsung.
Samsung’s struggles and Lee’s ordeal can be traced back nearly a decade to a corruption scandal involving former President Park Geun-hye. Park was impeached and imprisoned for accepting bribes from major corporations, including Samsung. As a result, Lee Jae-yong served 18 months in prison before his release in 2021. Alongside another legal case involving allegations of an illegal merger and accounting fraud, these legal troubles consumed Lee’s time for nearly eight years, preventing him from focusing on business. Lee was cleared of the merger and accounting fraud charges in both local and higher courts but a Supreme Court ruling is still pending. In his absence, Samsung’s professional managers were unable to make the bold, high-risk investments needed to stay ahead in AI chip development and other future technologies.
After his release in 2021, Lee made belated efforts to regain Samsung’s competitive edge. In late 2022, two years after the death of his father, former Samsung Chair Lee Kun-hee, he officially took over the group’s leadership. He then threw himself into global management, traveling nearly 100,000 kilometers — circling the globe two and a half times -- in just eight months. He rushed to meet and talk to numerous global business leaders and experts to make up for the lost time. However, in the fast-moving tech industry, his prolonged absence had already caused significant setbacks.
While Lee was confined to South Korea, unable to meet global leaders or stay ahead of industry trends, Chey Tae-won was actively engaging with business partners worldwide. He prioritized forging strategic partnerships, gaining insights from technology experts, and studying the geopolitical landscape to navigate the rapidly evolving global business environment. SK’s decision to invest in AI chips early on was a direct result of Chey’s proactive approach. For example, he established a think tank to analyze how geopolitics affect technology and launched a high-profile annual forum featuring prominent politicians, scholars and business leaders from South Korea, Japan and the US.
Of course, the contrasting trajectories of Samsung and SK cannot be attributed solely to their chairs. SK also benefited from favorable market conditions by having the right product at the right time, and its executives may have managed the company more effectively than their Samsung counterparts. However, in South Korea’s family-run conglomerates, known as chaebol, owner-chairs wield immense power, often relegating professional managers to mere figureheads. In such a system, Lee’s absence was undeniably a major disadvantage.
Although modern communication technology allows virtual meetings, business relationships — especially at the highest levels — are still built on trust, forged through personal interactions. This is particularly true for top executives navigating global partnerships and industry-shaping deals.
Looking ahead, the question is whether Samsung can catch up with SK and other global tech giants in key strategic fields now that Lee is free to travel and seek next-generation business opportunities. Samsung’s recovery will largely depend on his management skills, which remain unproven. His father, Lee Kun-hee, and grandfather, Samsung founder Lee Byung-chul, built the “Republic of Samsung” from the ashes of the Korean War, demonstrating their business acumen. Now, as Lee Jae-yong moves beyond his legal troubles, he faces the immense challenge of proving himself — and ensuring Samsung’s continued dominance in the tech world.
Lee Byung-jong
Lee Byung-jong is a former Seoul correspondent for Newsweek, The Associated Press and Bloomberg News. He is a professor at the School of Global Service at Sookmyung Women’s University in Seoul. The views expressed here are the writer’s own. -- Ed.
