With Lee behind bars

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With Lee behind bars

Kim Dong-won

The author is a former guest professor of economics at Korea University.
 
 
The legal case against Lee Jae-yong, vice chairman of Samsung Electronics, connected with the power abuse by removed President Park Geun-hye has finally ended after nearly four years. The bench delivered a grave judgment on large companies’ corporate governance and ethical lapses. Lee will have to finish his remaining one-year-and-a-half jail term.
 
Now, the question is what comes next. The law is the law, and the economy is the economy. Apple Inc. continued to innovate even after its founder Steve Jobs passed away. The personal misfortune of a founder, or his descendant, and his company’s state are separate. But Samsung is not Apple, and South Korea is not the United States. The corporate habitats differ greatly. Arguing that Apple prospered after Jobs’ passing and questioning why Samsung cannot do the same with Lee behind bars is equivalent to claiming that Korean companies work in the same environment as do U.S. companies.
 
The Covid-19 pandemic has thrust the world into a contactless — and greener — environment. In the wake of the pandemic, digital migration, integration and polarization will most likely deepen. Companies are coming together and forming alliances beyond borders and industries.
 
As a result, the nature of national competitiveness is changing. In the automobiles industry, the industry’s focus is increasingly on electric cars due to their increasing popularity. New technologies of artificial intelligence and 5G are combining to hasten autonomous mobility. Apple is said to be considering forming an alliance with Korean automakers for its electric autonomous vehicle project and Fiat Chrysler Automobiles and Group PSA, the French maker of Peugeot and Citroen, have merged to launch the fourth-largest automaking conglomerate. After that merges, Hyundai Motor Group was pushed to No. 5 from the No. 4 place.
 
Semiconductor manufacturers are integrating to meet surging demand as a result of pandemic-driven changes. Nvidia, a global leader in graphics processing units (GPU), purchased Britain-based ARM last year, and Qualcomm announced a plan to acquire Nuvia, a renowned central processing unit (CPU) maker. Even Intel, the undisputed chipmaking leader, is reportedly mulling consigning chip production to Taiwan’s TSMC.
 
These rapid developments will bring sweeping changes to corporate and industrial landscapes as well as new playing fields across the globe in the digital age, where countries will be fighting to sustain future jobs and incomes for their people.
 
Samsung Electronics Vice Chairman Lee Jae-yong is questioned by reporters before appearing at a hearing Monday in his trial for giving bribes to former President Park Geun-hye. [WOO SANG-JO]

Samsung Electronics Vice Chairman Lee Jae-yong is questioned by reporters before appearing at a hearing Monday in his trial for giving bribes to former President Park Geun-hye. [WOO SANG-JO]

In a semiconductor agenda unveiled in 2019, the Moon Jae-in administration envisions Korea’s share of the fabless chip market to rise to 10 percent in 2030 from 1.6 percent in 2018 and of the foundry market to 35 percent from 16 percent. The government hopes to double the number of hires in the segment to 60,000 from 30,000 in 2018. Samsung Electronics announced Vision 2030 and an investment of 133 trillion won ($121 billion) through 2030 to meet the national agenda drawn up by the government. Whether Samsung’s plan can be realized during a critical leadership vacuum is questionable. Even if Samsung Electronics implements its capital investment in the non-memory sector as planned, its 12-trillion-won capital expenditure would be just 40 percent of TSMC’s 30 trillion won. Samsung Electronics has not made a major M&A since its $8 billion acquisition of Harman, a global leader in connected car technology, in 2016. With Lee in prison, the company may not be able to pursue ambitious M&As for the next two years. Its risk of losing competitiveness will certainly grow.
 
That is not a misfortune just for Lee or Samsung Electronics. The company’s loss of steam during fast changes in the global industrial landscape in the wake of the pandemic will surely deal a serious blow to the country as well as reduce jobs for people. Koreans are wondering if the government really has any solutions to avoid the obvious damage.
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