중앙데일리

Samsung needs a boss

It all boils down to speed and adaptability ― which require a CEO with a vision.

July 13,2017
Samsung Electronics has ascended to the top ranks of the corporate world. The company’s second-quarter operating profit of 14 trillion won ($12 billion) matches the entire revenue of its domestic rival LG Electronics during the same period. But the company is not in a celebratory mood. Its Chairman Lee Kun-hee has been bedridden for three years and his son and heir Lee Jae-yong is in jail while being tried on bribery charges with former President Park Geun-hye.

Shrinkage has occurred in the global semiconductor market only twice over the last decade: in 2008 and 2012. Samsung Electronics stood out in its performance during these difficult periods. In 2008, the global chip market shrank 22 percent from the previous year after it was hit by the repercussions of the Wall Street-triggered global financial meltdown. In the final quarter of the year, Samsung Electronics incurred an operating loss of 740 billion won.

However, returning from a clandestine meeting with Chairman Lee during the New Year’s holiday in 2009, Samsung Electronics CEO Lee Yoon-woo announced an unprecedentedly aggressive capital investment plan. That year, Qimonda AG of Germany sank. It was once the second-largest dynamic random access memory (DRAM) maker. By the end of the year, Samsung Electronics made a remarkable comeback by raking in an operating profit of 11 trillion won.

Another turning point came in 2012. Another mighty DRAM player, Elpida Memory of Japan — then the world’s third largest — crumbled amid a market slump. Lee came to the Samsung Electronics headquarters office in southern Seoul every day demanding a strategy to further cement the company’s lead in the chip market. The company spent nearly half of the 29.5 trillion won earned by its blockbuster smartphones in new investments in semiconductors and displays. Those seeds ultimately produced a rich harvest for Samsung Electronics.

It takes $15 billion and two years to build a new-generation chip production line. Only those with foresight and the stomach for bold investments can survive in the industry. Samsung Electronics has been able to stay at the top because of fast decision-making by its chairman, a competent and organized future strategy office, and autonomous management of individual business units.

Now, the Lee family leaders are AWOL, although not of their own volition. The future strategy office was dismantled due to its role in the corruption scandal that led to the removal of the last Korean president and the jailing of the company’s heir apparent. The nerve center of Samsung has become dysfunctional.

The semiconductor market is hard to predict because of its volatility. In 2015, market researcher IHS estimated the DRAM market would be reduced to $44.2 billion in 2016 and $44.1 billion in 2017 from $48.6 billion in 2015. Big mistake! Due to explosive demand for memory chips for power clouding, big data centers and the Internet of Things, the market may balloon to $103.8 billion this year and $107 billion in 2018.

Earlier this month, Samsung Electronics announced it would be investing 37 trillion won in semiconductor and display factories, beating last year’s record spending of 24 trillion won. The business community thinks such astronomical investments cannot take place without the endorsement of the younger Lee.

But Samsung’s chief lawyer Lee Jong-wang offers a different view. Lee Jae-yong goes to court three days a week. Hearings often go beyond midnight. He is entirely preoccupied with his trial and can’t waste time with visitors other than his attorneys. Lee has no time for management decisions.

As the trial passes its 35th session, the independent counsel’s confidence that it has more than enough evidence to convict Lee has been shaken. The bench has considered personal notes by former senior presidential secretary An Chong-bum as circumstantial evidence instead of direct evidence. With the judge questioning the validity of An’s notes, Lee’s lawyers have gotten the upper hand and are accusing the special prosecutor of forcing charges on the acting chief of Samsung Electronics.

Samsung Electronics is unsure of how long it can stay at the peak. It is insecure about its future beyond five to 10 years. DRAM and NAND flash memory can only keep up their competitive edge through persistent advances in nano and stacking technologies. It all boils down to speed and adaptability, which means a CEO’s vision and determination is required. The company needs its captain for bold management decisions like Chairman Lee’s in past times of crisis.

JoongAng Ilbo, July 12, Page 31

*The author is a senior editorial writer of the JoongAng Ilbo.

Lee Chul-ho



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