[Inside Chodong] JY Must Establish a Control Tower for 'New Samsung'

[Asia Economy Reporter Park Sun-mi] "Active on-site management after reinstatement? Employee communication? These are not enough to create a ‘New Samsung.’ There is no decisive new business that can carry on the legacy of home appliances, mobile phones, and semiconductors."

Samsung Electronics Vice Chairman Lee Jae-yong is kicking off the establishment of ‘New Samsung’ by inspecting business sites and affiliates and strengthening communication with employees after his reinstatement. However, the industry questions whether Vice Chairman Lee can come up with a groundbreaking new business card worthy of the term ‘New Samsung.’ Samsung Electronics became a world-class company thanks to the businesses pioneered by the late Chairman Lee Byung-chul and Chairman Lee Kun-hee in home appliances, mobile phones, and semiconductors. There is widespread concern that the environment and obstacles are markedly different now, making it difficult for Vice Chairman Lee to discover and grow new businesses that can carry on that legacy.

Looking at "What kind of company is Samsung Electronics?" reveals why people worry about the company’s future. According to the semiannual report, Samsung Electronics’ main businesses include the DX division, which covers home appliances such as TVs, refrigerators, and air conditioners, as well as smartphones, and the DS division, which includes semiconductors such as DRAM and NAND flash, along with SDC, which manufactures OLED panels for smartphones. Although they produce the most advanced and outstanding products in the industry, all are confined within the categories of home appliances, mobile phones, and semiconductors established by the previous chairmen. In particular, semiconductors account for more than 70% of total operating profit. Samsung, led by JY, is enduring a hot summer under the cool shade of the ‘semiconductor myth’ created by the late Chairman Lee Kun-hee.

In May, Samsung announced plans to invest 450 trillion won over the next five years in semiconductors, bio, and new growth IT sectors. The company expressed its intention to expand beyond the currently strong memory semiconductors to the entire system semiconductor area, including foundry (semiconductor contract manufacturing). It also aims to lead core technologies of the 4th Industrial Revolution such as artificial intelligence (AI) and next-generation communications, and to grow bio to realize a second semiconductor myth.

Another reason for concern about whether Vice Chairman Lee can discover and grow future revenue sources to build the foundation of ‘New Samsung’ is the absence of a control tower. Since the dissolution of the Future Strategy Office, which served as the group’s control tower in 2017, Samsung lacks a proper organization to take charge of and execute new strategies. In cases where there is a holding company or an affiliate acting as a holding company, investments including mergers and acquisitions (M&A) can be vigorously pursued in line with the group’s direction. Samsung, however, is large but has no holding company, and the Future Strategy Office that previously played the control tower role was dismantled, leaving a gap in that function. Only dedicated task forces (TFs) divided by business units?such as business support (Samsung Electronics), financial competitiveness enhancement (Samsung Life Insurance), and design, procurement, and construction (EPC) competitiveness strengthening (Samsung Life Insurance)?exist, but there is no integrated hub within the group to gather capabilities and create synergy.

To break free from its current limitations, it is urgent for Vice Chairman Lee, who can now fully participate in management after reinstatement, to discover and grow survival businesses and for the revival of a control tower that can provide momentum through active investment decisions in new businesses. Vice Chairman Lee must continuously study and gather opinions on what shape ‘New Samsung’ should take. Current on-site management and employee communication are only the blueprint for ‘New Samsung.’ What business, beyond home appliances, mobile phones, and semiconductors that have made Samsung’s past and present, can represent Samsung’s future? We hope Vice Chairman Lee has found the answer.

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