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New Samsung CEO a force for change or caretaker?
Samsung Electronics' new chief has his hands full as he takes over a global technology giant that has been tarnished by scandal and wounded by a painful decline in its key memory chip business.
- Reuters
- Published: 23:53 May 23, 2008
Seoul: Samsung Electronics' new chief has his hands full as he takes over a global technology giant that has been tarnished by scandal and wounded by a painful decline in its key memory chip business.
Described by local media as "forceful" and a "peacemaker", Lee Yoon-woo's most pressing task will be to ease concerns about the family-controlled company's opaque management style and accusations of nepotism that have dismayed investors and depressed its share price.
Analysts say the 61-year-old's long track record with Samsung could also make him an ideal saviour for its ailing chip division, which has been hammered for more than a year by a steep worldwide market downturn and freefalling prices.
"It's a surprise. Some had been expecting him to retire, but instead he has come back to take on a bigger role," said Sun Chung, an analyst at Nomura Securities.
The chip unit represented 70 per cent of Samsungs' operating profit in the first quarter of 2006, but accounted for only 8.8 per cent of the total in the first quarter of 2008.
Lee took over the helm last Wednesday as part of sweeping changes at the top of Samsung, the world's biggest maker of memory chips and liquid crystal display (LCD) screens used in flat-screen TVs.
Image revamp
The company, and many investors, are looking to the new management to revamp its image after group chairman Lee Kun-hee stepped down after his indictment last month for tax evasion and breach of trust.
"He needs to increase the transparency of the company so that the company's value increases from its current deeply discounted level," said Nam Kim, principal analyst at market research firm iSuppli.
Foreign investors have long argued that some of South Korea's top companies could gain significantly in value if concern about their murky management practices were lifted.
Although Samsung is enjoying tremendous profits at its world-leading LCD division and world No 2 mobile phone division, growth in those sectors is expected to cool as market saturation and a global economic slowdown take their toll.
"The electronics industry is seeing a drop in profitability because of commoditisation and a slowdown in market growth," Lee said. "Finding new products and markets is of the utmost importance."
Lee went on to list areas such as new devices, energy, the environment and health as potential growth drivers.
"Samsung is continuously searching for a future growth area," said MS Song, an analyst at CJ Investment & Securities. "They have been looking at solar energy, organic displays and biotechnology among other things."
Some analysts say Lee could even push Samsung to buy new companies, something it has historically shunned.
"Lee is expected to be more proactive and change the company's conservative image by finding new business or acquiring other firms," said iSuppli's Kim. "If he achieves that, he will be a very successful CEO."
A graduate of Seoul National University's exclusive electronic engineering school, Lee is credited for shepherding then-unknown Samsung into the memory semiconductor business in the 1980s, when the industry was dominated by Japanese companies.
By 1987 it had posted its first profit and just six years later had become the world's top maker of memory chips.
Thanks in part to that decision, Samsung has transformed from a humble maker of black-and-white television sets to the world's biggest memory chip maker with a market value of about $100 billion - bigger than better-known Japanese technology names such as Sony (about $50 billion) and Matsushita Electric Industrial (about $55 billion).
Seat warmer?
Other company watchers, however, suspect the new CEO may end up merely keeping the seat warm while the firm's next dynastic successor is groomed to take over.
Former chairman Lee Kun-hee's family still controls Samsung through a network of shareholdings, and his son, Lee Jae-yong, had been rising smoothly through its upper ranks.
But when his father stepped down, the company announced the son would go abroad for a spell.
Many local commentators saw the move as a chance to help the younger Lee gain experience and credibility within the company, and to keep him out of the legal fray.
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