Samsung Chairman’s Illness Trains Spotlight on SuccessionJungah Lee and Sharon Cho
Samsung Electronics Co. Chairman Lee Kun Hee, who leads Asia’s biggest technology company and helps generate about a quarter of South Korea’s economic output, remains hospitalized in stable condition after emergency surgery following a heart attack.
Lee’s heart and brain functions are in “very stable condition,” and he is being treated at Samsung Medical Center in Seoul with a sedative, Lim Bo Mi, a spokeswoman for Samsung Group, said today. She declined to provide more details. Lee, 72, was resuscitated following an acute myocardial infarction on May 10, Rhee So Eui, a spokeswoman for Samsung Group, said in an e-mailed statement yesterday.
After taking over the Suwon-based business in 1987, Lee built it into the world’s largest maker of smartphones, televisions and memory chips, becoming South Korea’s richest man in the process. He appointed his son, Lee Jae Yong, vice chairman of the electronics unit in 2012 as Samsung Group became the nation’s biggest conglomerate with $326 billion in sales.
“His son’s been brought into the company’s management for a number of years now,” said Warren Lau, an analyst at Kim Eng Securities Ltd. in Hong Kong. “The question now is what is his vision for the company, whether he can find the next major growth driver.”
Lee, who was treated for lung cancer in 2000, underwent surgery to boost his oxygen intake after experiencing difficulty breathing the night of May 10.
Lee Kun Hee’s hospitalization comes as Samsung Electronics tries to rebound after posting the lowest sales in five quarters at its mobile-phone business, which accounts for 76 percent of operating income. Chinese producers are gaining in emerging markets with cheaper, feature-packed devices, and Apple Inc. is boosting iPhone sales through China Mobile Ltd. to better compete with Samsung’s marquee Galaxy S series.
Samsung Electronics rose 1.4 percent to 1,408,000 won as of 12:06 p.m. in Seoul after gaining 4 percent yesterday for its biggest increase in nine months.
The shares have gained 2.6 percent this year, compared with a 1.4 percent decline for the benchmark Kospi index.
“Some investors seem to be getting hopes up that strategic changes involving the company’s dividend policy and share buybacks may take place,” said Lee Jin Woo, a Seoul-based senior fund manager at KTB Asset Management Co.
The shares have surged more than 130-fold since Lee replaced the group’s founder, his father Lee Byung Chull, as chairman.
The patriarch chose his third son in 1971 ahead of two older brothers because they weren’t interested in the business, according to “The Lee Kun Hee Story,” a biography published in 2010. Lee Kun Hee was ranked among the world’s 100 most influential people by Time magazine in 2005.
Lee also leads Samsung Group, which has more than 70 affiliated companies, including Samsung Heavy Industries Co. and Samsung C&T Corp. He has an estimated net worth of $11 billion, according to the Bloomberg Billionaires Index.
Sales at Samsung Electronics surged to 228.7 trillion won ($223 billion) last year, making it the world’s largest electronics company by revenue. Lee initiated a company makeover in 1993 when he told employees in Germany he wanted to move up the manufacturing value chain and produce higher-quality products.
That year, Lee began overhauling Samsung Electronics after seeing the company’s products gathering dust in the corner of an electronics shop in Los Angeles, according to the biography.
By 2013, Samsung Group affiliates generated 333.9 trillion won in sales, according to data from Korea’s Fair Trade Commission. That is equivalent to about 23 percent of South Korea’s gross domestic product, based on 2013 figures from the Bank of Korea.
“Chairman Lee has made a significant mark not just for Samsung but also for the Korean economy as a whole by helping it globalize,” said Chung Sun Sup, chief executive officer of corporate researcher Chaebul.com. “There’s probably no individual or company that holds such a huge responsibility in a country.”
Lee Jae Yong joined Samsung in 1991, serving as chief customer officer and vice president at the strategic planning division before being promoted to vice chairman in December 2012. He studied at Seoul National University, Harvard Business School and Japan’s Keio University.
His sister, Lee Boo Jin, is president of affiliate Hotel Shilla Co.
“I wouldn’t think Chairman Lee would be deeply involved in day-to-day operations,” said Steve Myers, an analyst with JI Asia in Tokyo. “Samsung is of a size and complexity, and I would think they have a bureaucracy in place so they can handle unexpected events.”
Lee Kun Hee said in 2012 that the heavy machinery, shipbuilding and construction industries should follow Samsung Electronics’ footsteps to become globally competitive.
Samsung Heavy, the world’s third-biggest shipyard, is building the first floating natural gas production plant for Royal Dutch Shell Plc. Samsung C&T, the first of the Samsung Group subsidiaries to be set up, built the world’s tallest building in Dubai. Samsung Techwin Co. makes artillery systems.
Two other members of Samsung Group are combining, with Samsung SDI Co., a supplier of batteries to Apple, agreeing to buy chemical and electronic materials maker Cheil Industries Inc. for about 3.5 trillion won in stock.
Samsung Securities Co., South Korea’s largest brokerage by market value, will sell its entire stake in Samsung Asset Management to Samsung Life Insurance Co. for 272.8 billion won.
Another affiliate, information and communications technology provider Samsung SDS Co., plans to sell shares in Korea this year, according to a regulatory filing.
“The restructuring of Samsung Group is likely to speed up,” Greg Roh, a Seoul-based analyst at HMC Investment, said by phone.
(An earlier version of this story was corrected because of a mistranslated comment.)