Korea's chaebol ushers in new chapter with young leaders

From left, Samsung Electronics Vice Chairman Lee Jae-yong, SK Chairman Chey Tae-won, Hyundai Motors Chairman Chung Euisun and LG Chairman Koo Kwang-mo talk during the 2019 New Year greeting ceremony held in Seoul. / Korea Times file

Leaders of top four conglomerates seek governance overhaul, strategic alliance

By Kim Hyun-bin

Korea's top four conglomerates, known as chaebol here, have entered a new era with Samsung, Hyundai, LG and SK all under the leadership of next generation family members. The move will formally be complete when Samsung Electronics Vice Chairman Lee Jae-yong takes the helm of the country's largest chaebol following the recent death of his father Lee Kun-hee.

The most notable but common change is that the third- or fourth-generation leaders are all seeking to overhaul the corporate structure of their fiefdoms and form strategic alliances among themselves to find new business opportunities and sustainable growth.

They are now focusing on managing their conglomerates which have grown into global powerhouses over the past two decades, and are striving to further expand their empires through hefty investments in future growth industries.

Samsung Electronics Vice Chairman Lee Jae-yong

The top four are led by Samsung Electronics Vice Chairman Lee Jae-yong, Hyundai Motors Group Chairman Chung Euisun, SK Chairman Chey Tae-won and LG Chairman Koo Kwang-mo. Samsung Electronics was established in 1969, Hyundai Motors in 1967, SK in 1973 and LG, 1947.

Excluding SK Chairman Chey, the young leaders, all in their 40s to 50s, are fairly new to the game, heading their empires for less than three years.

Unlike their fathers or the first-generation owners, the young leaders are seeking more cooperation between their respective firms and frequently hold meetings to discuss issues surrounding their industries.

On Nov. 5, the four met for four hours at the Walker Hill Hotel for a closed door dinner.

"They met to offer condolences to Lee Jae-yong on the recent passing of his father Chairman Lee Kun-hee," an industry official said. All three chairmen paid their respects at an altar to the late chairman.

"The increase in cooperation is mostly due to evolving business trends. Before, the four major conglomerates were in fierce competition with each other and focused on overseas sales, so there was not that much cooperation. But now companies are going downstream from material businesses to producing finished goods so now they are more cooperative with each other," a group executive from a global consultancy said.

"For example, Samsung and LG produce batteries and other materials for Hyundai. It is important for there to be coordination between local materials businesses and local finished goods makers, which inevitably enhances cooperation."

Hyundai Motor Chairman Chung Euisun

The corporate environment these new leaders face is much different from their fathers' era.

What started off as local businesses have evolved into global powerhouses and the industry environment has become much more dynamic.

These days there are no industry boundaries and it has become imperative to seek synergy with other businesses through partnerships to fuel future growth. Meetings between the new leaders about batteries for electric vehicles held between May and July have emerged as a symbol of their new cooperation.

All four are aiming to create legacies as they follow in their fathers' footsteps.

SK Group Chairman Chey Tae-won

In his Oct. 14 inauguration speech, Chung Euisun said, "I feel a great deal of responsibility in opening a new chapter for the future." In the speech he mentioned the word "humanity" seven times and showed confidence that his company could be at the forefront of the autonomous vehicle market.

The eldest among the four, Chey Tae-won is aiming to change the face of the semiconductor industry pushing forward SK Group's slogan for "deep change" over the past several years, and now aims to intensify the competition with Samsung in the sector.

In 2012, SK acquired the world's second leading semiconductor firm hynix and recently decided to acquire part of world's leading semiconductor firm Intel in a deal worth $9 billion.

LG Group Chairman Koo Kwang-mo

"Do not see unfamiliar and harsh environments as a crisis but whether they can be used to fuel future growth," Chey said to employees in September.

The youngest Koo Kwang-mo has decided to physically split LG Chem's battery division and aims to take back third place in the "rankings" from SK.

Lee has also been busy in recent months, visiting Samsung factories both in Korea and overseas. In May, during a visit to a semiconductor plant in Xian, China, Lee emphasized "there is no time, we cannot lose the moment" showing his urgency to maintain the lead in the industry.

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