[40 Years of the Tokyo Declaration]③ Following His Father's Motto "Change Everything Except the Wife," Lee Jae-yong Instilled the DNA of 'Selection and Focus'

Reorganization into Digital and Electronics Company
Abandonment of Four Major Management Principles with Start of Union Management
Challenge to Secure Strong Leadership

Samsung Electronics Chairman Lee Jae-yong is seen inspecting the display production plant during his visit to Samsung Display Vietnam (SDV) near Hanoi, Vietnam, on December 22 last year.
[Photo by Samsung Electronics]

[Asia Economy Reporter Moon Chaeseok]

It is hard to find the determination in Lee Jae-yong to 'change everything except the wife.' There is no need for that. He has simply and quietly transformed Samsung into a digital and electronics company.

When asked how Samsung Electronics Chairman Lee Jae-yong differs from founder Lee Byung-chul and former chairman Lee Kun-hee, a senior company official responded, "Since Lee became the de facto leader of Samsung in 2014, there have been no radical performances like becoming number one in the semiconductor business, which was 27 years behind the US and Japan (1983 Tokyo Declaration), or burning 5 million mobile phones (1993). He quietly reorganized the business. He tried to turn the company into a 'Startup Samsung.'"

Samsung's management over the past decade has been a continuous process of selection and concentration. Non-core businesses such as defense and petrochemicals were divested. In November 2014, the petrochemical and defense divisions were sold to Hanwha. In the second half of 2015, Samsung SDI's chemical business unit, Samsung Fine Chemicals, and Samsung BP Chemicals were transferred to Lotte. At the time, Lee said, "The Korean industrial structure is redundant and risky," adding, "How can we beat Chinese competitors if companies in the same industry compete within a small land area?" He further stated, "To survive in global competition, we have no choice but to reorganize non-core affiliates."

Instead, Samsung focused on advanced industries. In 2019, it declared to the world its goal to become number one in system semiconductors and biopharmaceutical contract development and manufacturing organization (CDMO). In May last year, Samsung reaffirmed its major businesses as semiconductors, bio, and new growth IT (AI and next-generation communications). Samsung announced in 2021 and last year that it would invest 690 trillion won and hire 120,000 new employees over the coming years.

Samsung changed its organization and improved corporate culture. It abolished union-free management and gave up fourth-generation management. After his pardon and reinstatement in August last year, Lee visited domestic and overseas business sites to encourage employees. A horizontal title system was applied to executives and officers. Instead of 'Chairman Lee Jae-yong,' they must be called 'Jay,' 'JY,' or 'Jaeyong-nim.'

Some criticize Lee Jae-yong's Samsung as 'rational but not strong.' This means there is no strong control tower like the former controversial Future Strategy Office. There has been no 'one big hit (mega deal)' in seven years. Since acquiring the US automotive electronics company Harman for 9 trillion won in 2016, there have been no major mergers and acquisitions. It is inevitable to hear that decision-making speed and execution power have weakened.

It is also painful that core businesses like semiconductors have become a national confrontation and total war. The Biden administration in the US regards semiconductors as security assets and has started blocking equipment going to China. While actively attracting domestic investment, it has drawn in Korea, Taiwan, and Japan. The era when simply making good products to beat companies like Intel, TSMC, AMD, and Nvidia is over. Now, political compromise and sometimes bowing the head are necessary.

Corporate analysts predict that there will be no more 'second Tokyo or New Management Declaration' at Samsung. Although controversial, it is seen as difficult for Samsung to have strong leadership like US companies Amazon and Microsoft, which boldly cut tens of thousands of jobs. Kim Kyung-joon, CEO Score CEO, said, "Samsung's leadership has weakened just as semiconductors are reaching a turning point." He explained, "In a situation where a decisive momentum (growth engine) that will change its fate within 3 to 4 years must be created, there are elements of instability."