Bearing the Burden of Prolonged Judicial Risks... Samsung Resumes Aggressive Management

110 Trillion in Cash Assets, Expectations for Expanded Domestic and Overseas Investment
Strengthening Future Growth Investments in Semiconductors, Electric Components, Bio, 5G, and More

[Asia Economy Reporter Changhwan Lee] With the denial of the arrest warrant request for Samsung Electronics Vice Chairman Lee Jae-yong on the 9th, there are expectations inside and outside the Samsung Group that Vice Chairman Lee will actively resume company management.

Although he has not completely escaped judicial risks, since he can now proceed with judicial procedures while not in custody, he is expected to focus on fulfilling Samsung Electronics' previously declared large-scale investments and restoring social trust.

On the 9th, the business community anticipated that Vice Chairman Lee would continue his aggressive and proactive management approach after avoiding detention. Starting with his visit to the semiconductor research center at Samsung Electronics' Hwaseong plant earlier this year, he has been busy visiting various business sites nationwide to oversee operations.

Even after the outbreak of the novel coronavirus disease (COVID-19), he continuously visited business sites and even traveled to the semiconductor plant in Xi'an, China, to review management status and encourage employees.

Vice Chairman Lee has repeatedly promised bold challenges and investments in new businesses. A representative example was his declaration at the public apology press conference on the 6th of last month, stating, "While focusing on areas where we excel, we will boldly challenge new businesses."

Subsequently, during his business trip to Xi'an, China, on the 18th of last month, he said, "There is no future if we are held back by the past or complacent in the present. We must proactively prepare for massive changes to create new growth engines." On the 21st of the same month, when announcing the establishment of the Pyeongtaek foundry line, he stated, "We must not stop future investments, especially in difficult times," demonstrating an aggressive management stance.

Accordingly, there are expectations that Samsung Electronics will make more domestic and international investments this year than in previous years. In particular, the possibility of mergers and acquisitions (M&A) of promising overseas companies, backed by enormous cash reserves, is being discussed.

As of the first quarter of this year, Samsung Electronics' cash and cash equivalents, including short-term financial products, amount to a record high of 110 trillion won. Despite having substantial cash, Samsung Electronics has not conducted any large-scale M&A since acquiring the U.S. automotive electronics company Harman in 2016.

It is evaluated that this was because, after Vice Chairman Lee was detained in connection with the 'state affairs manipulation' case, the absence of the group head made it difficult to make large-scale investment decisions.

With Vice Chairman Lee recently resuming active management, the electronics industry anticipates that Samsung Electronics will once again seek M&A targets in future growth sectors such as system semiconductors, automotive electronics, 5G, and bio.

An insider familiar with Samsung's internal affairs said, "Large-scale M&A carries significant risks, so the owner's decision, who can take responsibility in case of failure, is very important. If Vice Chairman Lee makes a decision, M&A can happen at any time."

Vice Chairman Lee is also likely to put more effort into restoring social trust. He has been working to enhance public trust in Samsung by establishing the Samsung Compliance Committee, issuing public apologies, and showing a progressive willingness to resolve labor-management issues.

The recent agreement to end the high-altitude protest by dismissed worker Kim Yong-hee is also interpreted as reflecting Vice Chairman Lee's intentions. A business community official predicted, "Although Vice Chairman Lee has already promised several times to enhance Samsung's social trust, this non-custodial investigation may lead to more progressive and additional implementation plans that meet public expectations."

However, the unresolved judicial risks still pose a burden on Vice Chairman Lee's management activities. Although the court did not detain him this time, there is a possibility that the prosecution may reapply for an arrest warrant.

During the 2017 state affairs manipulation case, the special prosecutor's team requested an arrest warrant in January, which was denied, but reapplied in February of the same year, and the court accepted it, leading to Vice Chairman Lee's detention. Because of this, there is a strong sentiment within Samsung that the situation is not yet safe.

This content was produced with the assistance of AI translation services.