Saturday , March 6 2021

Samsung will come out of the scandal stronger



In half a decade of escalation, the latest in South Korea onions a scandal erupted between spectacle, shame, and Samsung. Pique over the puppy without supervision; huge cash payments; a shaman in the heart of government; the historic recall and imprisonment of the president; gift horse; millions of protests in the streets.

Last week, in a denouement that highlighted the dimensions of the scandal, authorities again replayed Lee Jae-yong, the de facto head of the Samsung group and the most powerful state leader in the country, for accepting bribes. It was a big debacle for an extremely large company.

It’s tempting, Samsung observers say, to view the entire long-running affair as a corporate Korean moment of Ragnarok: the messy fall of the industrial gods and the glittering structures they built from which a new, cleaner world could be born. The reality is that Samsung could pull itself out of all of this even more powerful and central to the Korean national project.

Lee’s forced membership in the club of closed Korean corporate supremacists re-ignites the debate over the extraordinary position of Samsung, the largest family-owned onions business empire, representing more than a quarter of the value of the Seoul Stock Exchange. The nation’s sharply defined relationship to love and hate with the company has become deeper.

The scandal has prompted critics who say Samsung’s scale is over-concentrating talent and pushing innovation elsewhere in Korea. But the company’s appeal to the country’s best graduates persists, and many consider the attack on Korea’s most precious gem politically motivated. At its most basic level, the scandal raises the question of how far Samsung – as the world’s largest maker of memory chips and smartphones – needs to simultaneously define the ambitions of the Korean economy and curb the country.

There are a number of arguments, says Sea-jin Chang, a professor at the National University of Singapore, who support the scandal theory as a turning point and the view that Samsung’s importance will decline from here. The widespread business system represented by the group, and revered as a tool for state-building, made it look outdated, slavishly tied to the non-core empires, and vulnerable to disruption in the digital world. Especially if the government cools the consent of its global corporate champion.

At the same time, attitudes toward Samsung may be strained as the heirs of the late group’s patriarch face an inheritance tax bill of about $ 10 billion that could force the sale of large parts of the business, diminishing its sense of inapplicability. Furthermore, the 18-month imprisonment of Mr. Lee (52) leaves Samsung exposed. While it doesn’t necessarily reduce its overall impact on the conglomerate, it distances it from the kind of decision-making that global business requires.

Perhaps the hardest blow lies at the root of the scandal: the machinations required by the cross-shareholder structure through which the Lee family maintains control of the group. Lee said in May that he had no plans to transfer control to his children. His comments were met with skepticism. In fact, said Geoffrey Cain, author of the book Samsung is growing, the way he could have done it was probably closed even if he wanted to. That leaves Lee in a prison cell with a devastating thought that loses face so that after him Samsung could become the first major onions without a family owner.

Faced with all of this, said Jun Kwang-woo, South Korea’s former chief financial regulator, Samsung’s market strength and importance to the economy will grow. The sale of the company would force Samsung to take the sales and targeting learning curve it should have accepted a long time ago.

The Covid-19 pandemic has created tremendous demand for the main products – TVs, smartphones and screens – of Samsung’s leading electronics business. The global shortage of chips testifies to the growing demand for products in which Samsung dominates. His investments in artificial intelligence seem overjoyed. The global introduction of 5G mobile services is an opportunity for Samsung to win even more market share.

Under strict portfolio management theories, Mr Yun said, South Korea’s dependence on Samsung may seem like an unreasonable concentration of resources – until it is astonishingly worthwhile and isolates the economy from the crisis that has hit other countries.

It’s easy to forget how close Samsung and others are onions, like LG Electronics, collapsed during the 1997 Asian financial crisis. In fact, they appeared distinctly stronger. It was not Ragnarok; nor is this.

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