SEOUL, – About one year into his chairmanship at the world’s leading chip and smartphone maker, Samsung Electronics Co. Chairman Lee Jae-yong has a lot on his plate.
A prolonged global economic downturn and a struggling semiconductor industry have cast a cloud over Samsung Electronics’ quarterly performance. Concurrently, Lee’s legal woes continue to loom large.
In the first and second quarter of this year, Samsung Electronics posted 640.2 billion won and 668.5 billion won in operating profit, respectively, marking the lowest quarterly earnings since the first quarter of 2009.
The tech giant reported operating profits of 14 trillion won for both the first and second quarters of 2022.
The weak bottom line came as the company’s main semiconductor business has been grappling with escalating losses stemming from a slump in memory chip prices and increased inventory.
Furthermore, the semiconductor industry faces heightened uncertainty, with the U.S. government tightening export restrictions to China, impacting the future of Samsung’s flagship business.
On top of the troubling chipmaking sector, Samsung’s future businesses in fields like bio, artificial intelligence and next-generation communications are confronting stiff competition both domestically and internationally.
The company has earlier announced plans to invest an additional 7.5 trillion won ($5.57 billion) over the next 10 years to foster the bio sector, which it sees as the next significant growth opportunity after semiconductors.
Despite Samsung Electronics’ emphasis on mergers and acquisitions (M&As) as a means to restructure its business portfolio, the company has been relatively static since its 9 trillion-won acquisition of Harman, a U.S. automotive electronics company, in 2017.
With Lee at the helm, there were expectations that M&As could be a key strategy to overcome the current challenges.
At the same time, Lee’s protracted legal proceedings have hindered his ability to make decisive business moves.
Lee is currently on trial over the 2015 merger of two Samsung affiliates and alleged accounting fraud at Samsung Biologics, a pharmaceutical unit. The merger and fraud are widely seen as key steps to strengthen his grip on the group.
He must attend the trial, which is held once or twice a week, unless there are special circumstances.
This situation required him to request court permission to participate in a Seoul meeting with Saudi Crown Prince Mohammed bin Salman in November last year.
If he is convicted in the ongoing trial, it could result in restrictions on his activities as chairman, including employment bans, as was the case after his conviction in a bribery case involving former President Park Geun-hye in 2021.
With the first anniversary of Lee’s inauguration coinciding with the third anniversary of the late Chairman Lee Kun-hee’s passing, Samsung Group is seeking a fresh approach with a renewed focus on “new management” to overcome the prolonged global downturn and a string of lackluster results.
The older Lee announced his signature “new management” policy in 1993, famously represented by his quote “Change everything but your wife and children,” and initiated sweeping reforms to build Samsung Electronics into a global player.
Samsung Group held a forum to commemorate the late Lee’s managing strategy and achievements, discussing the contemporary implications of his policy.
Against this backdrop, the impending executive reshuffle at Samsung Electronics, scheduled for early December, has been attracting attention.
There is growing anticipation that Lee will likely change the lineup of underperforming businesses like semiconductors and home appliances to bring about change.
Source: Yonhap News Agency