Samsung Without Lee Jae-yong, Future Projects at a Standstill

Samsung Electronics Vice Chairman Lee Jae-yong is heading to the courtroom as he attends the retrial sentencing hearing for the 'state corruption' case at the Seoul High Court in Seocho-gu, Seoul, on the afternoon of the 18th.
[Image source=Yonhap News]

[Asia Economy Reporter Kim Heung-soon] With the court imprisonment of Samsung Electronics Vice Chairman Lee Jae-yong, future businesses that Samsung Group had been pursuing, such as artificial intelligence (AI), 5G mobile communications, bio, and automotive electronic equipment, have come to a standstill. Due to the absence of the group’s head who must make critical decisions, it has become difficult to decide on large-scale investments or mergers and acquisitions (M&A). In the IT sector, where speed is vital, this is expected to be the biggest obstacle, raising concerns about significant losses to the Korean economy, which has been subdued by the COVID-19 pandemic.

AI, 5G Mobile Communications, Bio, etc.
Large-scale Investment and M&A All Stop

According to Samsung on the 20th, major affiliates including Samsung Electronics will seek countermeasures in response to Vice Chairman Lee’s imprisonment. Although the head of the group is absent, they decided not to appoint a proxy to act as a central figure in place of Lee.

It is also impossible to report on major group matters. Currently, Vice Chairman Lee is isolated in a single cell following COVID-19 quarantine guidelines at the correctional facility, and general visits have been suspended for at least four weeks. This effectively means that decisions on Samsung’s major issues have been halted. A Samsung official said, "While professional managers at major affiliates can manage ongoing business, it is difficult to carry out urgent matters such as discovering future growth engines or making investments without the owner’s decision."

In August 2018, Vice Chairman Lee announced plans to develop a ‘New Samsung’ by designating AI, 5G, bio, and automotive electronic equipment as four new growth engines, with an investment plan totaling 180 trillion won. In April 2019, he unveiled the ‘Semiconductor Vision 2030,’ aiming to become the world’s number one in the system semiconductor foundry (contract manufacturing) sector by 2030, with an investment of 133 trillion won. This aligns with the government’s three new industries set last year: semiconductors, future vehicles, and bio.

A Samsung official said, "To get the ongoing future businesses on track, mere enthusiasm is not enough. To steadily implement the plans, a certain level of drive is necessary, which is difficult without the owner’s decisive leadership." A business community official noted, "In the global IT sector, core issues change moment by moment, and the pace of change is very fast. To anticipate and respond swiftly, a network formed among IT company owners is needed, which is limited under a professional management system."

Impact on COVID-19 Recovery?
Significant Losses Inevitable for Korean Economy

The government’s strategy to utilize Vice Chairman Lee’s global network to secure COVID-19 vaccines has also been halted. The government requested Lee’s cooperation for additional vaccine procurement, but this was canceled due to the trial outcome. Samsung acknowledged Lee’s overseas travel plans but drew a line by saying, "Whether there was a government request related to vaccine procurement is difficult to confirm as it is unrelated to the group’s schedule."

Separately, Samsung has been actively supporting efforts to overcome COVID-19 damages last year. Following an emergency support of 30 billion won in donations and medical supplies, Samsung provided residential treatment centers for confirmed patients and dispatched medical staff to Samsung Medical Center, Kangbuk Samsung Hospital, and Samsung Changwon Hospital. These decisions were also possible due to Vice Chairman Lee’s swift decision-making.

Vice Chairman Lee stated, "Samsung, which has grown with the support of the people, must share and stand together with society in difficult times," and pledged, "We will do our utmost for those suffering from COVID-19 or dedicated to overcoming the crisis."