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Sat, September 23, 2023 | 17:55
Editorial
The Samsung risk
Posted : 2014-07-10 17:44
Updated : 2014-07-10 17:44
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Economy cannot depend on a few companies, industries

Almost the whole nation is stirring after Samsung Electronics released a
far-gloomier-than-expected earnings forecast for the second quarter.


In a provisional estimate of its own corporate performance, the world's largest maker of smartphones in terms of sales predicted its sales and operating profits in the April-June period were likely to fall 9.5 percent and 24.5 percent, respectively, from a year ago.

It is the third consecutive quarterly setback, and even more worrisome than the plunging profits is the first fall in sales in nine years, indicating that Samsung's problem may not be a temporary, but more lasting one.

The poor report card is due to two reasons ― the rise of Chinese competitors in the lower-end phone brands, and the Korean currency's steep appreciation. In a longer term, however, it means the time has long past for the world's top technology company to move away from the saturated phone market to a new growth engine.

Samsung knows this better than anyone else, but has found ― at least so far ― that knowing something and practicing it are two totally different matters. Before he was confined to bed by serious health concerns, Chairman Lee Kun-hee picked five new promising areas, including solar panels and electronic vehicle batteries, but none of them has yet to show any visible results.

We do not agree with some foreign media outlets which concluded, ''Samsung's heyday is over." The longer it takes for Samsung to transform itself from a fast follower to the first mover; however, investors' skepticism about the global IT leader will deepen. Adding to the gloom is the prolonged sickness of Chairman Lee, who has turned the former second-rate maker of home appliances into a global technology behemoth with his sharp judgment and strong push.

Investors are not certain whether Lee's son-and-heir, Jay-yong, has inherited the business acumen of his father, and whether Samsung without the elder Lee can run as smoothly as before. Moreover, Samsung's problem does not stop at a corporate agony but swells into a national headache because of the economy's undue reliance on Korea's largest company, which accounts for one-fourth of exports and half of the operating profits of all listed companies. When Samsung coughs, Korea gets a cold.

Whether one likes the family-controlled conglomerates or not, and in disregard of chaebol's contribution to the nation's economic growth, it is problematic, rather ridiculous, if most economic players pin their hopes on the business potential of a chaebol successor. Korea can ill afford to let Samsung's CEO risk turn into the risk of the national economy, nor allow Samsung to become the Nokia of Korea.

Before it gets too late, the government should disperse the nation's industrial focus to numerous, and promising, small and medium-sized enterprises, while encouraging new startups by young, innovative business talents. The current exploitive and heavy-handed relationship between large and small businesses should also be changed to co-prosperity through cooperation.

Former President Park Chung-hee helped to create an economic miracle through fostering chaebol. His daughter ought to do the same by helping smaller firms become hidden industrial champions.

 
miguel
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