With key chip business under pressure, legal risks lingering, Samsung braces for tough questions at shareholders meeting
Samsung Electronics Chair Lee Jae-yong sought to convey a message of urgency to company executives, saying Samsung has “lost its unique strength” and must take on a “do-or-die” mentality to tackle mounting challenges.
In a rare and direct message, Lee's remarks came via a prerecorded video shown to some 2,000 executives from Samsung affiliates who had gathered for a recent internal seminar, according to sources. The company has been holding a series of education seminars aimed at restoring what it calls “Samsung’s true identity.”
“Samsung is facing a matter of survival,” Lee was quoted as saying in the video, urging executives to reflect deeply on the situation at hand. “What is important is not the crisis itself, but how we respond to it. We need to invest for the future, even at the cost of sacrificing immediate profits.”
Lee further stressed the need to regain technological leadership amid growing concerns about Samsung's competitiveness in critical sectors such as semiconductors and artificial intelligence.
While Lee acknowledged concerns about Samsung’s future during the final hearing of a trial related to a controversial 2015 merger of Samsung affiliates late last year, these latest remarks appear to be a more urgent and severe assessment of the tech giant’s challenges.
The chairperson's message comes at a pivotal moment, with Samsung's annual shareholders meeting slated for Wednesday. Lee is unlikely to return to the board of directors, despite growing calls for his reinstatement to allow him to take on greater management responsibilities.
Lee remains the only leader without board membership among the chiefs of Korea's top four chaebol. He was part of the board from 2016 to 2019 when he served officially as vice chair, but he has not been reinstated, even after ascending to the company’s top seat in 2022.
The decision appears to be due to ongoing legal challenges that have weighed on Lee for nearly a decade.
It was widely believed that Lee was free from all legal risks when he was acquitted in February of stock-rigging and accounting fraud related to the merger of Samsung C&T and Cheil Industries. However, with the prosecutors’ decision to appeal to the Supreme Court, legal uncertainties are expected to continue to pile pressure on Lee’s leadership.
These legal complications coincide with a crucial period for Samsung as it grapples with vast challenges in its chip business, including disappointing earnings, increasing competition from China, weak demand for legacy memory chips and lagging rivals in the pivotal artificial intelligence chip sector.
All eyes are on what kind of strategy and blueprint Samsung will present at its shareholders meeting. Investors are demanding a clear strategy on how the company will recover from what has been described as an unprecedented crisis to its core businesses. Shareholders are expected to press management on concrete plants to boost earnings and address the sluggish stock price.
Observers suggest that Lee’s remarks were a calculated move ahead of the upcoming shareholders’ meeting.
“There have been demands by the shareholders and from the business sectors regarding Lee Jae-yong’s leadership style,” said Hwang Yong-sik, a professor at Sejong University’s College of Business and Economics. “Samsung also appears to see the current situation as a crisis, so it seems that Lee made a statement ahead of the meeting to give a strong impression of being proactive and holding management accountable, breaking away from his previous passive response.”
Hwang noted that Lee’s legal uncertainty has hindered the chief from being more proactive. “Until this judicial risk is fully resolved, he cannot act entirely freely,” he said. “Once his legal issues are cleared, we may see more aggressive leadership.”
Samsung's shares responded positively to Lee's strong remarks, climbing 5.3 percent to close at 57,600 won ($40) on Monday. Investors appeared to welcome the chief's bold stance on addressing the company's challenges.
Separately, Lee is scheduled to meet with Rep. Lee Jae-myung, leader of the main opposition Democratic Party of Korea, Thursday.
The two are expected to hold a discussion during a visit to the Samsung Software Academy for Youth, a joint program between the company and the Ministry of Employment and Labor aimed at training software developers through 1,600 hours of intensive education in a year.
The two could also discuss other topics including the ongoing political battle over the proposed Semiconductor Special Act, which would provide direct subsidies to chipmakers and exempt them from a national cap on working hours.
sahn@heraldcorp.com
