Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Management risks lead Samsung to skip celebration for Frankfurt Declaration
Late Samsung Chairman Lee Kun-hee is known for his trademark “New Management Initiative,” announced in 1993 during a company trip in Frankfurt, Germany. Samsung skipped the 28th anniversary of the initiative, Monday, amid risks including emergency management and a global crisis. Korea Times file
By Yi Whan-woo
By Yi Whan-woo
Marking the 28th anniversary of late Samsung Chairman Lee Kun-hee's “New Management Initiative” that put his company on the global map, the Korean conglomerate faces a series of management risks that led it to remain low key and skip commemorative events this year.
The country's top business group is in emergency management mode with its chief Lee Jae-yong being imprisoned since January, struggling to cope with a global semiconductor crisis that requires aggressive leadership, bold determination and business acumen more than ever.
The firm's misfortunes additionally include the death of the former chairman, the father of Lee Jae-yong, in October 2020.
Also known as the “Frankfurt Declaration,” the 1993 initiative was announced by the late chairman during a business trip to Frankfurt, Germany, that year with 200 company executives.
While in Germany, Lee uttered to the gathered executives the famous line “Change everything, except your wife and children.” This line exemplified Lee's trademark business philosophy that transformed a then-second-tier Samsung into a global electronics giant. Accordingly, his philosophy has been embraced by the group as doctrinal to date.
“The birth of the historic business management philosophy would have been celebrated if Lee Jae-yong was not imprisoned over a political corruption case,” said Shin Yul, a political science professor at Myongji University.
Lee is serving a two-and-a-half-year prison term over bribery and embezzlement linked to former President Park Geun-hye who is also behind bars.
The company logo of Samsung is seen on an entrance to its headquarters in Seoul. Korea Times file
Under the circumstances, the group's flagship Samsung Electronics has reportedly launched a large-scale “check-up” in terms of performance, although the tech giant's first-quarter earnings beat market forecasts.
Sales rose 18.2 percent from a year earlier to 65.38 trillion won ($58.6 billion), the largest-ever figure for any first quarter, and net profit jumped 45.5 percent to 9.38 billion won during the same period.
The performance is backed by the firm's smartphone and home appliance businesses that offset the relatively tepid performance of the semiconductor unit.
A repeat performance, however, is unlikely in the second quarter as the company's global market share in smartphones and TVs has “hit a wall” and are on a downward trend, according to industry sources.
The sources noted Samsung smartphones once accounted for over 30 percent in the international market but fell to 19.5 percent in 2020 amid the Galaxy 20's struggle against Apple's iPhone 12 in sales.
“A major player can eventually disappear from the market if it fails to cope with a decreased market share,” a source said. “Samsung may need to take tangible measures regarding its smartphones and it seems to be a more urgent matter than commemorating the Frankfurt Declaration.”
Samsung also faces challenges in retaining its reputation as the world's leading semiconductor manufacturer, especially in the foundry business.
It is ranked second in the global foundry market with a 16.4 percent share, but is far behind top-ranked TSMC with 55.6 percent.
Market observers say the gap may widen as the world is begging the Taiwanese company to address the global automotive chip shortage.
“This makes Lee Jae-yong's comeback desperate and you can see Samsung can't really be in a celebratory mood,” Shin said.
Meanwhile, the leaders of business and religious communities as well as some politicians have been calling for the release of Lee Jae-yong.
President Moon Jae-in apparently has been open to their calls. During a luncheon with the executives of the “Big Four” companies which also included Hyundai Motor, LG and SK, Moon recognized there was a growing public consensus on granting a pardon for Lee.