Lee Jae-yong's Detention Raises Foreign Concerns: "Samsung Phones Surpassed by China"

Last Year’s Top 2 Smartphone Sales Contested
China’s Sina Finance: "China with Technological Superiority is Catching Up"
WSJ: "Confusion After Chairman Lee Kun-hee’s Passing"
Japan’s Nihon Keizai: "Lack of Leadership Will Hinder New Business Development"

▲Lee Jae-yong, Vice Chairman of Samsung Electronics [Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] As Samsung Electronics Vice Chairman Lee Jae-yong was sentenced to prison and taken into custody, major foreign media raised concerns that Samsung's core business sectors could be overtaken by China. Especially with China, which dreams of semiconductor dominance, closely watching this situation, foreign media also forecast that if the leadership vacuum prolongs, Samsung's position in the global semiconductor market could be shaken.

On the 19th, China's Sina Finance reported, "It has become Samsung's fate to be used in political scandals," adding, "The absolute technological superiority that Samsung has been proud of is facing a strong challenge." It emphasized, "This pressure mainly originates from China."

The newspaper specifically pointed to the mobile phone business. According to market research firm Counterpoint Research, as of 2019, Samsung ranked first in global smartphone sales, with Huawei in second place, but in the second quarter of 2020, Huawei surpassed Samsung.

Moreover, excluding Apple in third place, companies ranked fourth to seventh are all Chinese firms such as Xiaomi and OPPO, indicating that Samsung faces a massive challenge from China. Particularly in China, Samsung's mobile phone market share is shrinking to less than 1%.

The timing of Vice Chairman Lee's incarceration, coinciding with the return of the semiconductor supercycle, is also expected to be a burden. Especially with Taiwan's TSMC, which dominates the foundry (semiconductor contract manufacturing) sector, announcing record-high investments, concerns are rising that Samsung could lose competitiveness in the foundry market amid a leadership vacuum.

Japan's Nihon Keizai Shimbun also covered the news of Vice Chairman Lee Jae-yong's court imprisonment, stating, "As Samsung faces China's pursuit in core businesses such as smartphones, if the absence of leadership continues long-term, it is expected to hinder the nurturing of new businesses."

Nihon Keizai added, "While many believe that Vice Chairman Lee's imprisonment will have limited short-term impact on performance, disruptions are inevitable in mid- to long-term investment plans, mergers and acquisitions (M&A), talent recruitment, and new business development."

The Nihon Keizai Shimbun identified the most problematic area as new business development. Samsung has been making proactive investments in five future growth engines: biopharmaceuticals, 5G, artificial intelligence (AI), automotive parts, and semiconductors.

In particular, Nihon Keizai noted, "Vice Chairman Lee has often emphasized that 'only technological gaps are Samsung's way to survive' and has led the early launch of new businesses."

The Wall Street Journal (WSJ), one of the three major US media outlets, prominently covered this news with the headline at the top of its main page: "Samsung Faces Leadership Vacuum with Lee Jae-yong's Re-imprisonment."

WSJ evaluated, "Following the passing of Chairman Lee Kun-hee, the generational power transfer process plunged South Korea's large corporations into turmoil."