Without a trace
The author is the chief editor of the JoongAng Ilbo.
Samsung Electronics Vice Chairman Lee Jae-yong missed a crucial opportunity. U.S. President Joe Biden held a videoconference from the White House on chip manufacturing and the supply chain. He proclaimed semiconductor were part of U.S.’s “infrastructure” and investments were needed to address not just the immediate chip shortage but “once-in-a-generation” bet on the future of both the semiconductor and batteries business.
The virtual conference was hosted by National Security Adviser Jake Sullivan and National Economic Council Director Brian Deese. CEOs of 19 global IT, automaking and chipmaking companies, including Alphabet, Samsung Electronics and TSMC, were invited. With a wafer in his hand, Biden vowed to “step up our game” by making big investments to lead the world in the 21st century as in the past century. The absence of Lee was a national loss.
Four years ago, President-elect Donald Trump invited Lee to a tech summit at Trump Tower in New York. But Lee had to miss that too as he was banned from leaving the country due to his involvement in the abuse of power case against impeached president Park Geun-hye. At that time, 14 CEOs, including Tim Cook of Apple, Jeff Bezos of Amazon, Eric Schmidt of Alphabet, and Elon Musk of Tesla attended the meeting. The shortlist was reportedly drawn up by PayPal co-founder Peter Thiel, a vocal supporter of Trump. Thiel is one of Lee’s global network connections.
Vice president-elect Mike Pence, nominee for Trump’s chief of staff Reince Priebus, Wilbur Ross, nominee for commerce secretary, plus Trump’s three children and son-in-law Jared Kushner were there. “Call my people or call me,” Trump told the CEOs, vowing to “make it a lot easier for you to trade across borders” if the companies make investments and jobs in America. If Lee — the sole non-American CEO to get an invite — had been there, he could have played a key role between Seoul and Washington.
The world is seeing another war on the economic front. Governments and enterprises have become united for an upper hand in the global war. President Moon Jae-in also chaired an expanded economic meeting, vowing “strong support” for companies to make Korea a “comprehensive semiconductor powerhouse” through the momentum of a chip super cycle as if to mimic the Biden conference,
Korea is at the center of the chip war. Samsung Electronics and SK hynix are the world’s two largest DRAM makers. Samsung Electronics, which already dominates DRAM and NAND flash memory, is investing big in consignment chipmaking to narrow the gap with foundry leader TSMC, which has 56 percent market share. Chips are among the few sectors Korea still dominates after losing much of the leadership in mainstay industries to China. Korean companies have gained the opportunity to keep a distance from China at a time when America is battering Chinese companies to contain their rise. If Korea loses its dominance in chips, there is no hope for the economy. The absence of Lee is a shame at the crucial moment.
The Korean chaebol have a shameful history of colluding with strongmen and using their power in very selfish ways. The scorn of the public is justifiable and the that negative legacy should come to an end one day. Still, the family control system has the merit of quick decision-making and bold action. That particular advantage of our corporate system should not be cast away. Samsung Electronics needs to display bold leadership at such a pivotal time for the Korean economy.
Lee cannot return to management until 2027 even after finishing his prison term in July 2022 due to a five-year employment ban afterwards. We cannot know what will happen during the period. The U.S. is tops in chip design, but takes up only 12 percent of chip manufacturing. It has teamed up with Taiwan, which commands 22 percent of global market share, to contain China to a 15 percent share. Taiwan has severed business ties with China’s Huawei Technologies. The U.S.-China standoff is unavoidable as chips are essential to all industries and the defense sector.
Samsung, responsible for 21 percent of global market share, cannot proceed with a $1.7 billion foundry project in the U.S. Its leadership vacuum may cost it market share and a technology edge. Korea could one day become an economic subject to China.
The Korean economy needs to find a breakthrough in such dire circumstances. Pardoning Lee and sending him back to work is the best strategy in the war of the economies. Sohn Kyung-shik, chairman of the Korea Employers Federation, has pleaded for Lee’s pardon so that Korea won’t lose its chip leadership.
The move must not be viewed as a privilege to a business tycoon. It should be regarded as a chance for Lee to make up for his mistakes by exercising global capabilities for the country. The relationship with the U.S. could improve and Korea could sustain some leverage over China. The Moon administration must fend off Chinese pressure. Only then will China respect Korea. It is also the way for Korea to defend both the economy and security in the crossfire between America and China.
Lee was sentenced for irregularities in management. He promised not to all his children to succeed him. He has vowed a law-abiding management. Does he need to prove more? During a visit to a Samsung chip factory two years ago, President Moon promised to do all he can to back Samsung Electronics to get to the top in system semiconductors and the foundry business by 2030. He must keep his promise by first releasing Lee from jail and putting him back to work. The decision should be made on grounds of necessity.