Samsung's Challenge After Lee Jae-yong's Pardon... Continuous Investment and Job Creation

JY "Will Support the Economy Through Continuous Investment and Youth Job Creation"

Vice Chairman Lee Jae-yong of Samsung Electronics, who was reinstated through the special pardon on August 15 Liberation Day, is moving at the Seoul Central District Court in Seocho-gu, Seoul on the 12th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Park Sun-mi] Samsung Electronics Vice Chairman Lee Jae-yong has gained freedom in his management activities through the special pardon on August 15th Liberation Day. This is interpreted as the new government's intention for Vice Chairman Lee to take the lead in overcoming the crisis amid economic uncertainties higher than ever before. After the announcement of the special pardon, Vice Chairman Lee also stated, "We will contribute to the economy through continuous investment and the creation of youth jobs."

According to the Ministry of Justice and business circles, Vice Chairman Lee was sentenced to 2 years and 6 months in prison in January last year for the political scandal case and was released on parole last August 15th Liberation Day. Including the period he was detained at Seoul Detention Center during the early investigation, he had already completed his sentence by the end of last month, but he was unable to engage in normal management activities due to restrictions on employment under the Act on the Aggravated Punishment of Specific Economic Crimes, which lasted for five years. Since his sentence has already ended, this special pardon is significant in that Vice Chairman Lee is now free from the employment restriction regulation that was supposed to apply until 2027, allowing him to engage in normal management activities.

With Samsung Electronics promising to invest 450 trillion won over the next five years in future growth sectors such as semiconductors, bio, and new growth IT (information and communication technology), and to hire 80,000 new young employees over five years to expand youth employment alongside the launch of the new government, it is expected that detailed strategies will be prepared to implement investment and hiring plans. Especially since investment and job creation are areas the new government is focusing on amid the economic crisis, Vice Chairman Lee’s role is crucial.

Vice Chairman Lee also pledged to make efforts so that this pardon leads to responsibility and duty as a business leader. He said, "I will contribute to the economy through continuous investment and youth job creation, and repay the expectations of the people and the government's consideration. I will strive even more to share with and grow together with our society."

It is also anticipated that Vice Chairman Lee will immediately return to management and work to transform Samsung, which is surrounded by global economic uncertainty, with bold decisions. Until the first half of the year, Samsung Electronics performed well in the semiconductor sector, driving the company's best-ever performance, but in the second half, it faces a challenging management environment due to global high inflation, high interest rates, and geopolitical uncertainties. Accordingly, it is expected that prioritizing large-scale mergers and acquisitions (M&A) will be a key focus.

With South Korea’s participation in the ‘Chip 4 Alliance’ effectively formalized and U.S. President Joe Biden signing the ‘Chips and Science Act,’ which supports the semiconductor industry with a total of $280 billion (365.68 trillion won), Samsung Electronics is expected to focus on maximizing efficiency by weighing the pros and cons of strengthening semiconductor cooperation with the U.S. under Vice Chairman Lee’s leadership.

The previously loosened global network is also expected to be tightened again. There is a possibility of a visit to the U.S. next month. Samsung Electronics is investing $17 billion to establish a second foundry (semiconductor contract manufacturing) plant in Taylor, Texas, but the groundbreaking ceremony has not yet taken place. Accordingly, after the United Nations General Assembly in New York in September, there is speculation that President Yoon Suk-yeol and President Joe Biden will hold a Korea-U.S. summit in the U.S. and visit the Taylor foundry plant together with Vice Chairman Lee.

Market speculation also suggests that Vice Chairman Lee will be appointed as a registered director and inaugurated as chairman at the shareholders' meeting in March next year. He has maintained the title of vice chairman for 10 years since his promotion in 2012. A business circle official said, "Since Vice Chairman Lee has been restricted from participating in management, it is highly likely that he will embark on full-scale crisis management following this Liberation Day special pardon. There are many important decisions that have been postponed, so there is a lot to be done."

However, the fact that there are still ongoing trials means that legal issues surrounding Vice Chairman Lee have not been completely resolved, which remains a burden. Although the shackles on his management have been lifted, judicial risks still exist due to trials related to unfair mergers of affiliates and accounting fraud allegations. Vice Chairman Lee is accused of intentionally inflating the stock price of Cheil Industries and lowering the stock price of Samsung C&T during the merger process to strengthen his group’s control.

Economic organizations are paying attention to the impact of this August 15th Liberation Day special pardon on the economy. The Federation of Korean Industries stated in a commentary, "We greatly welcome the president’s decision to give businesspeople the opportunity to return to the management field through the Liberation Day special pardon. Since this reflects the public demand for overcoming the economic crisis and achieving a new leap forward, the business community will do its best to overcome the economic crisis and contribute to national economic development based on the entrepreneurial spirit of serving the country through business."

The Korea Chamber of Commerce and Industry also said, "We believe those pardoned this time will fulfill their roles and responsibilities as businesspeople to overcome the economic crisis and continue the country's future prosperity." The Korea Employers Federation explained, "We hope this pardon will not only serve the original purpose of revitalizing corporate investment to restore economic vitality but also become an opportunity to achieve national integration, a nationwide task." The Korea International Trade Association also stated, "The special pardon was a timely decision necessary to unite the capabilities of businesspeople and revive the economy, which is at a crossroads of stagnation."