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THE INVESTOR
April 24, 2024

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[KH Explains] A look back on Lee Jae-yong's first 'New Samsung' year

  • PUBLISHED :October 27, 2023 - 09:58
  • UPDATED :October 27, 2023 - 09:58
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Samsung Electronics Executive Chairman Lee Jae-yong (second from left) inspects the Samsung Electro-Mechanics’ key production facility for Multilayer Ceramic Capacitor in Tianjin, China, in March. (Samsung Electronics)

Friday is the first anniversary of Samsung Electronics Executive Chairman Lee Jae-yong's official ascension to the top post at Korea's largest conglomerate.

Over the past year, the Samsung chief conducted various management activities to explore new opportunities, laying the foundation for his own “New Samsung” vision, while succeeding the legacy of his father, the late Chairman Lee Kun-hee, who died three years ago.

Experts agree that his push for “supergap technology” is the right direction for Samsung to consolidate its leadership in its core businesses, but they also advise him to make bolder decisions such as large-scale mergers and acquisitions to secure an early edge in future growth drivers.

Supergap strategy

The investment push for supergap technology is widely touted as the key feature of Lee's first year as chairman. Despite growing fears of an economic slowdown, Samsung has continued spending on research and development.

He has presented a blueprint to make Samsung -- the world’s No. 1 memory chip maker -- the global leader in system semiconductors by 2030, outpacing its archrival Taiwan Semiconductor Manufacturing Co. in terms of production capacity.

Samsung’s device solution division in charge of the tech giant’s sprawling chip business has suffered trillions of won in losses in recent quarters, hit hard by the slump in the memory chip market this year. But at the same time, the company has bolstered its readiness for the future by making massive investments.

In the second quarter this year, when Samsung’s operating profit plummeted 95 percent on-year, R&D spending soared 15.2 percent from a year prior to some 7.2 trillion won ($5.3 billion), while facility investment recorded 14.5 trillion won, up 18 percent in the same period.

The company is planning to spend 20 trillion won by 2030 to develop a new semiconductor R&D complex in Giheung, Gyeonggi Province, which is expected to work on advanced chips.

 

Samsung Electronics Executive Chairman Lee Jae-yong (third from left) poses with Samsung C&T employees at the Barakah nuclear power plant construction site in Al Dhafra of Abu Dhabi, United Arab Emirates, in December. (Samsung Electronics)

Flexible corporate culture

Lee’s other strategic focus as chairman is nurturing tech talent, another legacy inherited from his forerunners.

Samsung is the only conglomerate that has maintained a regular recruitment system to hire new workers among the nation’s top four chaebol groups. Most big companies here now hire new employees specifically when they need to fill vacancies.

In May last year, Samsung unveiled an ambitious goal of hiring some 80,000 new employees over the course of five years. As of June this year, the number of Samsung workers has reached an all-time high of 124,070 on its home turf. Industry watchers predict the figure is likely to exceed 130,000 this year.

Lee is also seeking to create a more flexible corporate culture and promote younger executives in their 30s and 40s. As part of efforts to change a rigid office hierarchy, he reportedly prefers to be called “JY” rather than “chairman.”

On Thursday, a day ahead of marking his first anniversary, the conglomerate's battery maker and IT solutions provider -- Samsung SDI and Samsung SDS, respectively -- decided to introduce the senior outside director system.

This system was decided to be introduced preemptively in order to reorganize responsible management and governance centered on the board of directors, which shows Lee's drive for autonomous management.

Under the scheme, the two firms can improve the independence and status of the board of directors. While the Samsung chief has laid stress on board-centered responsible management, other affiliates will also introduce the system, according to Samsung officials.

Extensive global network

Lee's solid global network is considered one of his greatest strengths. When the world was competing for access to vaccines during the COVID-19 pandemic in 2021, Lee was credited with playing a pivotal role in securing Pfizer vaccines for the Korean government.

In November alone last year, Lee held a series of meetings with global business and political leaders, including Saudi Crown Prince Mohammed bin Salman, ASML CEO Peter Wennink and Spanish Prime Minister Pedro Sanchez.

His meeting with Dutch Prime Minister Mark Rutte that same month was following a meeting in June, which is said to have helped Samsung secure ASML chip equipment essential to produce advanced chips.

In the following months, he also met with BMW chief Oliver Zipse to bolster the long-standing partnership between Samsung and the German luxury carmaker, while discussing display and digital cockpit cooperation with Ferrari Chairman John Elkann upon his visit to Korea. Lee and Tesla CEO Elon Musk also agreed on next-generation technology development, especially on chips for fully autonomous vehicles.

Those high-profile meetings demonstrated the scalability of the new companionship Lee is establishing as the Samsung chief. He is building a united front among industry leaders and partner firms in creating a Samsung-led industrywide ecosystem amid ever-evolving technologies.

Samsung Electronics Executive Chairman Lee Jae-yong (left) shakes hands with Saudi Crown Prince Mohammed bin Salman at the Al Yamamah Palace in Riyadh, Saudi Arabia, Sunday (Saudi time). (Yonhap)

Stability over change

Experts evaluated Lee's first-year chairmanship as "stable,” considering lingering uncertainties surrounding the sluggish economy and geopolitical tensions. But they said it was time to work on new growth engines in futuristic fields, in addition to the group’s core chip and battery businesses.

"Samsung needs to balance its memory chip and non-memory chip businesses to avoid being vulnerable to global risks," said Kim Dae-jong, a business professor at Sejong University.

"Active investment is required in sectors, including bio, artificial intelligence and robots. With more than 100 trillion won in Samsung's cash reserves, Lee needs to be more active in leading Samsung's new innovation and change from the second year of his chairmanship."

Lee Byung-tae, a professor of information systems at Korea Advanced Institute of Science and Technology's College of Business, pointed out that global tech giants like Google have expanded their businesses through dozens of mergers and acquisitions.

“Although one year was not enough time for Lee to show his own leadership style or management vision distinct from those of his charismatic father, he is surely a leader who respectfully leads a global company,” the professor said.

An anonymous expert, who rated Lee's leadership 85 out of 100 points, said that Lee "has established his own management philosophy even before taking the top post. He seems to be focusing more on solidifying internal stability for now."

By Jie Ye-eun  (yeeun@heraldcorp.com)

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