Supreme Court Upholds Complete Acquittal
8 Years and 8 Months Since 2016 Prosecutor Investigation
Challenge to Rebound in Second Half... Focus on Semiconductor M&A
Possible Support for Slow APEC Preparations
Attention on Return as Registered Executive After 6 Years
On July 17, the Supreme Court finalized a not-guilty verdict in the 'Samsung C&T?Cheil Industries Unfair Merger' and 'Samsung Biologics Accounting Fraud' cases, releasing Lee Jae-yong, Chairman of Samsung Electronics, from nearly a decade-long 'judicial shackles.' Specifically, it has been about 8 years and 8 months since he was questioned as a witness by prosecutors on November 13, 2016, in connection with the 'state affairs manipulation' scandal during the Park Geun-hye administration.
Chairman Lee will no longer be subject to prosecution investigations or court trials. As a result, all restrictions that had made certain management activities, such as scheduling, difficult have been completely lifted.
Within the business community, there is growing interest and anticipation regarding Chairman Lee's next moves. First and foremost, he faces the challenge of reversing the company's recent weak performance in the second half of the year. Samsung Electronics' preliminary results for the second quarter of this year show sales of 74 trillion won and an operating profit of 4.6 trillion won. The operating profit fell below 5 trillion won for the first time in six quarters, leading to evaluations that the results were below expectations. The final results, to be announced on July 31, are not expected to differ significantly from these figures. The semiconductor business, which has struggled in the global market, had a major impact on these results. The company has yet to establish a foothold for recovery in the high-bandwidth memory (HBM) market, which is a high value-added sector, and its foundry (semiconductor contract manufacturing) business has not escaped from losses. When announcing the preliminary results, Samsung Electronics explained, "The memory business saw a decline in performance due to one-off costs such as inventory write-downs."
Many experts point out that in order to make a comeback in the second half of the year, the semiconductor business must find a breakthrough. The industry is watching to see if Chairman Lee will strengthen the business through a major semiconductor-related merger and acquisition (M&A). This expectation is fueled by the fact that Chairman Lee attended the 'Allen & Co. Conference,' held from July 9 to 14 in Sun Valley, Idaho, USA. This event, also known as the 'Sun Valley Conference,' is well-known as a summer camp for billionaires. It is attended by CEOs of global companies, and discussions held in Sun Valley have often led to M&As between companies. Notable examples include Comcast's acquisition of NBCUniversal in 2011 and Amazon founder Jeff Bezos's acquisition of the Washington Post in 2013.
The recent acceleration of Samsung's M&A activities has further heightened expectations for a semiconductor-related deal. In May, Samsung Electronics signed agreements to acquire the audio division of Massimo in the US and German premium HVAC specialist Flakt. The costs were approximately 500 billion won and 2.4 trillion won, respectively, totaling nearly 3 trillion won. The acquisition of Flakt marks Samsung's first trillion-won-level M&A in eight years, since acquiring Harman, an automotive and audio company, in 2017.
Some observers also hope that Chairman Lee will actively support the successful hosting of the Asia-Pacific Economic Cooperation (APEC) summit, scheduled to take place in Gyeongju in October. With only three months left until the opening, there is still a shortage of accommodations for foreign guests, and the atmosphere of excitement has not been fully established, causing difficulties for the government and related agencies in their preparations. With the not-guilty verdict allowing him greater freedom, there is a possibility that Chairman Lee will leverage his extensive global network to actively support APEC. Samsung has joined the organization promoting the APEC CEO Summit alongside other companies, increasing the likelihood of such involvement. Although not yet confirmed, it is also expected that Chairman Lee will attend the APEC CEO Summit with other business leaders. With key world leaders such as Chinese President Xi Jinping and CEOs of global corporations expected to attend, analysts believe Chairman Lee will use the opportunity to strengthen his network and lay the groundwork for overseas business expansion.
Within and outside the company, there is keen interest in whether Chairman Lee will return as a registered executive. He has not returned to a registered executive position for six years since stepping down in 2019. The aftermath of judicial risks, starting with the state affairs manipulation scandal and continuing with the recent 'unfair merger and accounting fraud' cases, as well as the resulting negative public opinion, are believed to have played a major role. His return as a registered executive would signal his commitment to responsible management and help lay the foundation for management stability. Registered executives can participate in the board of directors, the company's legal decision-making body, and have the opportunity to directly explain management issues at shareholder meetings.
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