"Reduced Risk for Samsung, Possibility of Large-Scale M&A Including Artificial Intelligence (AI)"
Samsung Electronics Vice Chairman Lee Jae-yong is entering the courtroom to attend the warrant hearing held on the 8th at the Seoul Central District Court in Seocho-gu, Seoul. (File photo) / Photo by Jinhyung Kang aymsdream@
[Asia Economy Reporter Changhwan Lee] Positive evaluations are pouring in both domestically and internationally regarding the Supreme Prosecutors' Office Investigation Deliberation Committee's recommendation to 'halt investigation and not prosecute' Samsung Electronics Vice Chairman Lee Jae-yong. This decision by the committee is analyzed as an opportunity for Samsung not only to gain an advantageous position in its battle with the prosecution but also to reduce owner-related risks, enabling more proactive investments.
According to industry sources on the 29th, KB Securities released a report titled "Samsung Electronics Judicial Risk Mitigation Outlook," stating, "The committee's decision is positive in that it alleviates Samsung Group's judicial risks going forward and also provides an opportunity to escape owner-related risks."
The report viewed this decision as a trigger for large-scale investments by Samsung Electronics. Kim Dong-won, a KB Securities researcher who authored the report, said, "Since acquiring automotive parts company Harman in November 2016, Samsung Electronics has had no major mergers and acquisitions (M&A)." He forecasted, "Samsung Electronics will actively seek large-scale M&A in various fields such as semiconductors, artificial intelligence (AI), and automotive electronics to strengthen its mid- to long-term competitiveness."
He added, "Companies like Samsung Biologics and Samsung C&T will also benefit from the alleviation of management's judicial risks in financing for new plant expansions and overseas project bids, as well as in bid evaluations."
Foreign media also assessed the outcome positively for Samsung. The U.S. Wall Street Journal (WSJ) described the committee's decision as Samsung's second 'victory' following the court's dismissal on the 9th of the arrest warrants requested by the prosecution for Vice Chairman Lee, former Samsung Future Strategy Office head Choi Ji-sung (Vice Chairman), and former Future Strategy Office Strategy Team leader Kim Jong-joong (President).
WSJ noted, "The prosecution has interrogated numerous Samsung executives and conducted dozens of raids," but analyzed, "This recommendation will allow Vice Chairman Lee and his legal team to gain a favorable position against the prosecution, which has been investigating for 19 months."
Bloomberg also commented, "Although the committee's recommendation has no legal binding force, it will be difficult for the prosecution to ignore it," and evaluated, "This result served as a barometer of how Korean public opinion views Vice Chairman Lee's guilt and the legitimacy of the prosecution."
Japan's Nikkei (Nihon Keizai) newspaper also stated, "The prosecution has followed the committee's judgments in other cases so far," and suggested, "There is a possibility that Vice Chairman Lee will avoid detention and prosecution." In fact, the prosecution has never defied the committee's recommendations in eight previous instances.
There are also forecasts that Vice Chairman Lee's management activities will expand following the committee's decision. It is expected that Lee will oversee Samsung's future growth engines (system semiconductors, AI, 5G, automotive electronics, bio) announced in August 2018, and actively encourage various investments and employees to realize the goal of becoming the number one system semiconductor company by 2030, declared last April.
However, since the prosecution's investigation has not yet concluded and there remains a possibility of forced prosecution, some point out that judicial risks have not been completely eliminated.
Accordingly, it is also anticipated that Vice Chairman Lee will continue cautious activities while closely monitoring domestic and international situations. A business insider said, "Vice Chairman Lee's judicial risks are not completely over," and "It is expected that he will continue a prudent management approach within a certain scope."
Some controversies claiming that the committee made a biased decision also pose a burden for Samsung. Some argue that the case is complex and extensive, making it inappropriate for the general public to judge whether to prosecute. However, since 8 of the 14 committee members were legal professionals directly appointed by the Prosecutor General, criticisms that the committee lacks expertise are considered illogical.
A legal sector official stated, "The conditions for investigation deliberation committee members are defined as 'experts from various social sectors with abundant virtue and insight, possessing knowledge and experience in the judicial system, etc.'," and added, "The current committee reviewing this case included four lawyers, law school professors, accounting experts, mid-level journalists, religious figures, and other reputable and insightful individuals."
He continued, "They should be regarded as having sufficient qualifications and capabilities to make objective and fair judgments based on their expertise," emphasizing, "Compared to the investigation team, these members have a much broader perspective and long experience, enabling comprehensive judgment and simultaneously checking the prosecution's abuse of power."
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