With the sudden passing of former Samsung Electronics Vice Chairman Han Jong-hee raising concerns of a leadership vacuum, Samsung Electronics Chairman Lee Jae-yong's crisis management skills are being put to the test. As Samsung Electronics struggles with poor performance across all business sectors, including semiconductors, TVs, and home appliances, the absence of Vice Chairman Han, who led the finished goods division, presents a painful situation.
In the business community, there is criticism that Lee should resolve the limitations of finance-focused management, which relies on the 'Business Support Task Force' as the control tower for Samsung Electronics' highest decision-making body. Kim Ki-chan, emeritus professor of business administration at Catholic University, said, "Professional managers under the Chief Financial Officer must inevitably focus on short-term results," and emphasized the need to focus on fundamental values such as technology development, in line with founder Lee Byung-chul's philosophy of "not doubting once you have hired someone."
◇ leadership vacuum amid poor performance… focus on JY's crisis response
According to industry sources on the 27th, Samsung Electronics' Business Support Task Force is contemplating plans to address the absence of Vice Chairman Han. With Samsung Electronics' DS (Semiconductor) institutional sector struggling with poor performance and a dire need for a rebound in the smartphone, TV, and home appliance sectors integrated with artificial intelligence (AI), the company has encountered an unexpected adverse factor.
Samsung Electronics is facing criticism for failing to adequately respond to the changes of the AI era and falling behind in technological competition. The company has been unable to supply 5th generation HBM (HBM3E) to its key client Nvidia due to being outpaced by competitors SK hynix and Micron in the high-bandwidth memory (HBM) business, a key component of AI chips.
The foundry (semiconductor contract manufacturing) business, which Lee declared would achieve 'world's number one status by 2030,' is seeing its gap with industry leader TSMC widen. Samsung's foundry market share was 9% last year, while TSMC's share reached 67%. The smartphone business has also lost its top shipment position to Apple for two consecutive years, and profitability is worsening amid competition from emerging Chinese corporations. The home appliance business continues to suffer from a vicious cycle of high costs and low revenue.
Lee recently scolded Samsung executives, emphasizing significant changes. Lee reportedly said, "Samsung has lost its distinct resilience," and stressed that it's time for the management to thoroughly reflect and act boldly, with the resolve of 'dying to live.' This statement indicates a shared sense of crisis, given Samsung Electronics' situation being severe enough to threaten its survival.
Lee said, "Samsung's unique resilience, which activated during crises, is not visible," adding, "There is no bold innovation or new challenges to be found, and we are busy maintaining the status quo." Lee also advised, "Even if it means sacrificing immediate profits, we must invest for the future."
◇ "Without the spirit of Lee Byung-chul and Lee Kun-hee, Samsung relies on finance-focused leaders who only see 'numbers.'"
Given Lee's high-intensity critical statements after a long period of silence, some speculate that he may have been pointing out Samsung's overall decision-making structure, focusing not only on business divisions but also on the Business Support Task Force led by Vice Chairman Jeong Hyeon-ho. Critics from the business community and academia have pointed out that the finance-centered Business Support Task Force manages with "irresponsible management" behind the scenes.
The question is whether Lee's awareness of the problems will lead to actual action. Professor Kim Ki-chan pointed out that the current issue with Samsung Electronics is not the complacency of business managers, but the finance-centered system. Professor Kim noted, "The core of ‘Samsung's unique resilience’ Lee mentioned lies in the 'empowerment system'," adding, "The talent management, known as 'Yonginmului' from Chairman Lee Byung-chul to Chairman Lee Kun-hee, granted firm authority to field experts, contributing to Samsung's competitiveness. However, present-day Samsung Electronics emphasizes short-term results through financial management, resulting in the empowerment system not functioning."
With Samsung Electronics experiencing a combination of poor performance and leadership vacuum issues leading to chaos, what message Lee will deliver in the future is crucial. An official familiar with Samsung noted, "There's a growing call for Lee to clearly establish Samsung's responsible management and act directly so it can be reborn as a corporation rooted in technology," adding, "Currently, the only person who can effect fundamental change in Samsung's leadership is Chairman Lee Jae-yong."