Leadership vacuum

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Leadership vacuum

Samsung Electronics has raked in the highest-ever profits since its founding in 1969. In the third quarter, which ended on Sept. 30, the flagship manufacturer in South Korea recorded $2 trillion won ($54.9 billion) in sales and 14.5 trillion won in operating profits. In that period, Samsung’s operating profit margin hit 23.4 percent, an outstanding achievement as a manufacturer, not an information technology company.

The accumulated operating profits of Samsung Electronics — 38.46 trillion won — until the third quarter also has broke its earlier record of 36.79 trillion won in 2013. The company’s remarkable performance owes much to its brisk sales in semiconductors thanks to their ever-growing demand in the IT industry around the globe.

Despite Samsung’s excellent performance at home and abroad, however, a mixed feeling prevails in the conglomerate. What concerns the electronics giant most is the over-concentration of semiconductors in its profits portfolio. Market analysts say the company earned nearly 10 trillion won in operating profits from the semiconductor category in the third quarter. The profit accounts for nearly two-thirds of its overall profits at 14.5 trillion won during the period.

But no one knows how long the boom in the semiconductor business will continue. China is fully prepared to boost its production of various types of memory chips in an all-out manner from next year. In smartphones and home appliances, Chinese companies are rapidly catching up.

Samsung Electronics has to pay heed to an unprecedented leadership vacuum after Kwon Oh-hyu — vice chairman, CEO of semiconductor business and chairman of the board — announced on Friday that he would step down. He has been playing the roles of the sick Chairman Lee Kun-hee and his heir, Lee Jae-yong, who has been put behind bars for the past eight months for court trials over his bribery charges involving the Choi Soon-sil scandal.

Announcing his resignation, Vice Chairman Kwon complained by saying that Samsung Electronics can hardly read future trends and find a new growth engine due to a critical lack of fast decision-making and investment, even though it makes record profits at the moment. He underscored that now is the time for his younger executives to start all over to meet the tough challenges of rapidly changing information technology. Samsung Electronics must take the leadership vacuum as an opportunity to overcome the unseen crisis it faces.

JoongAng Ilbo, Oct. 14, Page 30
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