Despite Semiconductor and Galaxy S22 Effects, 'Crisis Theory'... Will Samsung Be Okay Without JY?

Record-breaking earnings yet 'uncertainty' repeatedly mentioned in conference call
Fierce global semiconductor dominance competition... Judicial risks shackling amid pressing issues
Employment ban for 5 years after sentence expiration could become a 'Lost Decade'

Samsung Electronics Vice Chairman Lee Jae-yong is departing through the Gimpo Airport Business Aviation Center in Gangseo-gu on the 14th. Vice Chairman Lee is scheduled to visit Samsung Electronics' Artificial Intelligence (AI) research center in Canada, followed by a visit to the United States to make the final decision on the site for a new foundry (semiconductor contract manufacturing) plant in the U.S. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporters Sunmi Park and Jinho Kim] Samsung Electronics' record-breaking first-quarter performance, often considered the 'lean season' in the electronics industry, was supported by the backbone roles of semiconductors and smartphones, which are bearing fruit based on past bold investments and research and development (R&D). Despite numerous internal and external uncertainties such as the spread of COVID-19, global supply chain instability, and the Game Optimization Service (GOS) controversy, Samsung Electronics achieved its highest-ever results, earning the reputation of 'Samsung under control.' Contrary to market forecasts that 'winter is coming,' the limited decline in memory semiconductor prices was also cited as a contributing factor. However, as global semiconductor hegemony competition intensifies, concerns are growing that without the participation of the group's leadership in management, the future may be problematic.

◆ Overcoming Internal and External Adversities... Semiconductors and Galaxy S22 as 'Two Wings' = Semiconductors were the key contributors to Samsung Electronics' outstanding first-quarter results. Thanks to a smaller-than-expected drop in memory semiconductor prices, the traditionally weakest first quarter in terms of performance still yielded such results. This reaffirmed the success formula of 'Semiconductors are indeed Samsung.'

Samsung Electronics recorded sales of 26.87 trillion KRW from semiconductors alone in the first quarter, significantly surpassing market expectations of 25 trillion KRW. Although the prices of DRAM and NAND flash were expected to fall by 6.2% and 5.1% respectively in the first quarter, the situation turned out better than anticipated.

The successful launch of the Galaxy S22 series in the first quarter, despite the 'GOS controversy,' also played a crucial role. According to industry sources, the Galaxy S22 surpassed 1 million units sold about two weeks earlier than its predecessor, the Galaxy S21. Strong sales of premium TVs such as Neo QLED and growth in major home appliances like the Bespoke line also supported overall revenue.

With this unprecedented first-quarter performance, Samsung Electronics is on track to surpass 300 trillion KRW in sales this year. If it achieves this, it will mark a new milestone, surpassing the 200 trillion KRW sales recorded in 2012, making it a historic achievement after 10 years.

◆ Despite Top Performance, Crisis Concerns Emerge... Challenges Amid Leadership Absence = Despite the record-breaking first-quarter results, market outlook remains cautious. This is due to the prolonged absence of Vice Chairman Lee Jae-yong amid fierce global competition for semiconductor dominance, with countries investing heavily.

Currently on parole and unable to fully engage in management, Vice Chairman Lee's sentence will expire at the end of July, but under the Act on the Aggravated Punishment of Specific Economic Crimes, he will face a five-year employment restriction. Without a pardon, this effectively means a decade-long judicial risk shackling him.

Major issues such as a 20 trillion KRW semiconductor investment in the U.S., fierce competition with Taiwan's TSMC in the foundry (semiconductor contract manufacturing) market, and the establishment of future strategies to generate new revenue are inevitably facing setbacks. Particularly in the DS Division (semiconductors), which accounts for more than half of the 14 trillion KRW operating profit, active investments and mergers and acquisitions (M&A) have stalled, raising concerns that competitors may overtake Samsung.

During the conference call following the earnings announcement, concerns about future uncertainties were clearly reflected among executives and investors. Samsung Electronics expects that not only the second quarter but also the second half of the year will continue to face issues such as macroeconomic uncertainties, expanded COVID-19 lockdowns in China, prolonged Russia-Ukraine war causing logistics disruptions, and demand shocks.

Jinman Han, Vice President and Head of Strategy Marketing at Samsung Electronics' Memory Business Division, repeatedly mentioned 'uncertainty' when discussing performance forecasts, stating, "It is difficult to prematurely judge the duration or market impact of uncertainties such as the Russia-Ukraine situation and global inflation," adding, "Continuous monitoring is necessary."

Due to the inevitable demand impact from rising raw material prices, the environment necessitates focusing on high value-added products. Anticipating uncertainties in the memory sector, Samsung plans to actively respond to steady demand centered on servers and continuously improve the quality of its product portfolio by expanding sales of high value-added products such as DDR5 and LPDDR5x. Additionally, in foundry, Samsung aims to enhance technological leadership by being the first in the world to mass-produce the GAA 3-nanometer process and will focus on expanding supply to global customers in the Americas and Europe to actively pursue new orders. Improving yield and increasing the proportion of advanced processes remain challenges.

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