Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Samsung chairman's legal battle set to end this week after decade-long struggle
Samsung Electronics Executive Chairman Lee Jae-yong attends a meeting with President Lee Jae Myung at the presidential office in Yongsan District, Seoul, June 13. Joint Press Corps
By Nam Hyun-woo
Samsung Electronics Executive Chairman Lee Jae-yong’s legal battle over a controversial merger between Samsung C&T and Cheil Industries will likely come to an end this week, closing a chapter of legal questions that have weighed on Korea’s biggest business tycoon for the past 10 years.
The Supreme Court is set to deliver the final ruling at 11 a.m. Thursday on allegations that Lee was involved in unfair trading, stock price manipulation and accounting fraud during the 2015 merger.
The ruling will come exactly 10 years after the merger plan for Samsung C&T and Cheil Industries was passed during the former’s shareholders meeting on July 17, 2015.
Lee was indicted in September 2020 on charges of involvement in a scheme orchestrated by Samsung’s now-defunct Future Strategy Office to secure control of the conglomerate at minimal cost through the merger.
In February last year, the Seoul Central District Court found him not guilty on all 19 charges, and the Seoul High Court upheld the lower court ruling in February this year.
The merger was a subject of heated controversy even before Lee’s indictment, as it invited an injunction request from Elliott Management, as well as a special counsel probe alleging a relationship between this case and former President Park Geun-hye’s influence-peddling scandal.
Since the indictment, Lee has had to make more than 110 court appearances, spending a considerable amount of time and energy managing legal risks. He also limited overseas trips.
As the lower and upper courts have now both acquitted Lee of all 19 charges, the business community expects Lee will likely be freed from his most pressing legal risks and can now concentrate more on his role as the head of Samsung Electronics.
Samsung Electronics Executive Chairman Lee Jae-yong arrives at the Seoul Central District Court in Seocho District to attend a trial session, Feb. 9, 2023. Yonhap
Samsung Electronics is currently reeling from contracted profitability due to a protracted slowdown in its semiconductor business. Last week, the company estimated that its operating profit for the second quarter of this year will likely remain at 4.6 trillion won, ($3.33 billion), down 56 percent from a year earlier. This was far short of brokerages’ consensus of 6.3 trillion won.
Its chip making Device Solutions Division has lost technological leadership in the artificial intelligence (AI) processor market, leading to the sharp decline in operating profit. Analysts assume the division will post an operating profit of only 400 billion won, far lower than the 6.45 trillion won from a year earlier.
This was coupled by mounting labor disputes and growing uncertainties stemming from U.S. tariffs and subsidy programs, prompting industry officials to speculate that the tech giant now finds itself in a full-blown crisis on multiple fronts.
Samsung Electronics Executive Chairman Lee Jae-yong arrives at the Seoul High Court in Seocho District, Seoul, Nov. 11, 2024. Korea Times photo by Ryu Ki-chan
However, Lee has opted for stability over sweeping reforms. At the end of last year, when signs of deteriorating performance began to surface, he conducted personnel appointments focused more on continuity than change, prompting speculation that his decisions were influenced by the ongoing legal risks.
Since Lee's acquittal in the appeals court in February, Samsung has made aggressive investments by acquiring Masimo’s audio division and most recently the U.S. health care startup Xealth, but no game-changing deals have materialized so far.
Industry officials say that Lee is likely to accelerate bold business restructuring and explore new growth drivers for Samsung, if the Supreme Court clears him in the upcoming ruling.
Lee has been attending the annual Allen & Company Sun Valley Conference in Idaho, held from July 9 to 13 (local time). The high-profile gathering also includes Apple CEO Tim Cook, GM Chair and CEO Mary Barra, OpenAI CEO Sam Altman, Disney CEO Bob Iger and Netflix Co-CEO Ted Sarandos.
Lee’s attendance is prompting interest in Samsung’s next move because the conference is known as a venue where major global partnerships often take shape. In 2014, Lee met with Apple CEO Tim Cook at Sun Valley, and the two sides withdrew their smartphone patent lawsuits against each other, except for ones in the United States.
It is widely speculated that Lee will return to the board of Samsung Electronics, which would allow him to play a more official role in managing the company while taking on greater responsibility as a board member. Another possible reform that has been mentioned is the establishment of a control tower for Samsung Group that would coordinate affiliate businesses and pursue synergy among them.
“Given that Samsung has disbanded its Future Strategy Office in the wake of former President Park’s scandal, it would be burdensome for Lee to rebuild another control tower with legal risks remaining,” a conglomerate official said. “Rebuilding the control tower or returning to the board are commonly mentioned as ways to overhaul Samsung’s structure, but they are only possible when the legal issues are all resolved.”