Samsung Electronics Chairman Lee Jae-yong Faces Challenges Amidst Economic Downturn and Legal Woes
After his first year as chairman of Samsung Electronics, Lee Jae-yong is confronted with a series of challenges amidst a global economic downturn and his ongoing legal battles. The semiconductor industry, a key sector for Samsung, has been struggling with losses due to falling memory chip prices and increased inventory. This has resulted in the lowest quarterly earnings for Samsung since 2009, with operating profits of 640.2 billion won and 668.5 billion won in the first and second quarters of this year, respectively.
In addition to the struggles in the semiconductor market, Samsung’s future businesses in bio, artificial intelligence, and next-generation communications are facing intense competition both domestically and internationally. To navigate these challenges, Samsung Electronics has announced plans to invest an additional 7.5 trillion won ($5.57 billion) over the next decade to foster the growth of the bio sector, which is seen as a significant opportunity after the semiconductor business.
One of the strategies Samsung had looked to employ under Lee’s leadership was mergers and acquisitions (M&As) to restructure its business portfolio. However, since the acquisition of US automotive electronics company Harman for 9 trillion won in 2017, the company has been relatively static in this regard.
Unfortunately, Lee’s legal troubles have hindered his ability to make decisive business moves. He is currently on trial for alleged accounting fraud at Samsung Biologics and a controversial 2015 merger of Samsung affiliates. These legal proceedings are taking up a significant amount of his time and require him to attend court sessions once or twice a week.
Moreover, if Lee is convicted in the ongoing trial, it could result in restrictions on his activities as chairman, similar to when he faced employment bans after a bribery conviction involving former President Park Geun-hye in 2021. These legal woes add another layer of complexity to Lee’s already challenging role.
As Samsung Group marks the first anniversary of Lee’s chairmanship, the conglomerate is seeking a fresh approach to overcome the ongoing economic downturn and lackluster results. The company aims to reinvigorate its focus on new management, a strategy first introduced by Lee’s late father, Chairman Lee Kun-hee, in 1993. This approach initiates sweeping reforms and emphasizes the need for change within the organization.
In commemoration of the late chairman’s significant contributions, Samsung Group recently held a forum discussing the contemporary implications of his managing strategy. The impending executive reshuffle at Samsung Electronics, set to take place in early December, has been generating attention, with expectations that Lee will make changes within underperforming businesses like semiconductors and home appliances to drive transformation.
While Lee Jae-yong faces significant challenges in the current economic climate and his ongoing legal battles, Samsung Group remains resilient as it seeks a fresh approach to overcome these hurdles. The company aims to leverage its strengths and pursue new opportunities while navigating the dynamic global market.
