Former Samsung President Lim Hyung-kyu: "Semiconductors, Technology Comes First and Second... Full Authority Must Be Given to On-Site Managers" [Samsung Crisis Diagnosis]④

"The Essence of the Semiconductor Industry is On-site Execution
Engineers and Customers Must Collaborate Closely"

"Semiconductors are all about technology, first and foremost. If we fall behind in the competition, there is no future for Korean semiconductors. Since all strength comes from the field, for Samsung Semiconductor to leap forward again, full authority must be given to the field's chief manager."

Im Hyung-kyu, former president of Samsung Electronics, is being interviewed by Asia Economy at his office on Samsung-ro, Gangnam-gu, Seoul, on the 31st of last month. Photo by Jo Yong-jun

Im Hyung-kyu, former president of Samsung Electronics who led Samsung Electronics' memory semiconductors to become world No. 1 in the 1990s and laid the foundation for Samsung's system (non-memory) semiconductors, said in an interview with Asia Economy on the 31st of last month that there is no answer other than a straightforward approach to overcome the difficulties Samsung Electronics is currently facing. On the same day, Samsung Electronics announced its third-quarter results with semiconductor operating profit falling short of 4 trillion won. Memory performed relatively well, but foundry (semiconductor contract manufacturing) still could not avoid losses.

Regarding the foundry business, former President Im said, "I think Samsung Electronics may have taken it somewhat lightly," and added, "There is a need to change the strategy." Samsung Electronics had previously announced a vision to achieve world No. 1 in fabless and foundry by 2030 through the 'System Semiconductor Vision 2030' in 2019. His diagnosis is that by focusing on foundry strategically, memory was weakened as a side effect. He said, "It was a mistake to disperse resources by operating memory and non-memory in parallel." However, regarding the foundry spin-off, he evaluated, "The investment is uncertain," and "It could become risky."

Samsung Electronics attracted attention by successfully mass-producing the 2nm (nanometer, one billionth of a meter) Gate-All-Around (GAA) process ahead of TSMC. However, it is struggling somewhat due to lower yield (ratio of good products). Meanwhile, TSMC is focusing on maximizing the yield of the 3nm process. He said, "Developing the most advanced process is important, but the stability of technology is also crucial," and added, "Foundry requires a long-term perspective."

He also suggested that Samsung Electronics should consider setting a non-memory strategy centered on specific chips such as mobile application processors (AP), similar to how Taiwan's TSMC established an image sensor foundry through investment in Japan.

Former President Im said that the reason Samsung Electronics was able to surpass Japan and achieve world No. 1 in memory was due to a constant sense of crisis. He said, "When memory prices plummeted in 1996 and the chicken game began, it was truly a war," and added, "The late Chairman Lee Kun-hee instilled this sense of crisis and the mindset of 'we must win' among employees ultimately led to victory."

He said Samsung Electronics needs time to steadily solve problems to strengthen its fundamentals. He said, "There are about 500 core technologies required for memory semiconductors," and "The task is to look at each one carefully and identify what is lacking." His advice is that ultimately, the field must hold full authority. He positively evaluated the decision to appoint Vice Chairman Jeon Young-hyun as the head of semiconductors. Vice Chairman Jeon previously handled semiconductor design work and has a track record of defeating Taiwan in the memory semiconductor war from 2007 to 2009, known as the 'second chicken game.'

Im Hyeong-gyu, former president of Samsung Electronics, is being interviewed by Asia Economy at his office on Samsung-ro, Gangnam-gu, Seoul, on the 31st of last month. Photo by Jo Yong-jun

Throughout the interview, former President Im emphasized the importance of technical talent. This was interpreted as meaning that securing talent in Samsung Electronics and, more broadly, in Korean semiconductors is not easy. He believes the fundamental reason Samsung Electronics had to write a letter of reflection is the weakening of technological capabilities. In his book 'Hidden Heroes,' he also stated that it is essential to secure about 5,000 to 6,000 elite members, three per core technology. He said, "People who understand technology well should be placed in key positions such as division heads, business unit heads, and senior managers to build a strong technical organization."

Former President Im said Samsung Electronics needs to deepen its understanding of customers to overcome the crisis. He said Samsung surpassed all Japanese memory companies in the past because it quickly supplied a variety of products that customers wanted. When demand for PC chips surged at the time, competitors released five new products annually, while Samsung Electronics introduced 20 chips each year.

He emphasized, "The essence of the semiconductor business is field execution capability," and added, "Product planning, business strategy, and customer sales are all carried out within the technical organization." In particular, he pointed out, "It is important for field engineers to directly face customers and accurately understand what is needed."

Regarding Samsung Electronics' slump, former President Im said, "Ultimately, it is a matter of how time is spent." Since Samsung Electronics needs at least 10 years or more to strengthen its technological competitiveness, the key is what and how to fill the gaps. He stressed, "It is necessary to create an atmosphere where engineers are respected and to have a spirit of pursuing future businesses unconditionally if there is potential for mainstream technology."

He also said that from Samsung Electronics' perspective, having a competitor like SK Hynix still strong is helpful. He meant that SK Hynix's success in the global market with high-bandwidth memory (HBM) would stimulate Samsung Electronics.

He said, "From a national perspective, I think Korean memory will be fine for the time being through competition." Because SK Hynix's advance has bought Samsung Electronics time to reorganize by fending off chasing Chinese companies and others. He said, "If we maintain the 'one-two' (world No. 1 and No. 2) positions in DRAM and NAND flash, Korean semiconductors will never die."

Interview by Choi Il-gwon, Head of Industry IT Department

Compiled by Moon Chae-seok, Reporter