Samsung’s Lee Opts for Stability to Manage RevivalRose Kim and Jungah Lee
Lee Jae Yong chose stability over recriminations at Samsung Electronics Co. as the vice chairman kept the leaders for smartphones, TVs and memory chips even after posting the smallest profit since 2011.
All three co-chief executive officers, including the mobile division’s Shin Jong Kyun, remain in their jobs as part of the annual management revamp by Samsung Group. The conglomerate announced 11 executive changes today, citing business performance reasons.
Lee has taken a greater role at Samsung Group since his father, Lee Kun Hee, was hospitalized in May after a heart attack. In just six months, South Korea’s biggest chaebol has posted slumping earnings, cut cross shareholdings, announced initial public offerings and pushed an aborted merger of its shipbuilding and engineering units.
“At a time when there’s market uncertainty regarding the company’s fourth-quarter results, and so many changes happening throughout the group’s affiliates, Samsung probably thought it was time to look around and ensure internal stability,” said Lee Jin Woo, a Seoul-based fund manager at KTB Asset Management Co.
Co-CEOs Kwon Oh Hyun, who leads the components business, and Yoon Boo Keun, the head of consumer electronics, will stay in their roles, Park said.
The promotions announced today include elevating Kim Hyun Suk to president of the visual-display business and Jun Young Hyun to president of the memory business, according to an e-mailed statement today.
Shares of Samsung Electronics rose 0.6 percent to 1,295,000 won at the close of trade in Seoul. The stock has dropped 5.6 percent this year after a 9.9 percent decline last year.
The 58-year-old Shin has spent about three decades at the company, including leading the introduction of its marquee Galaxy range. He has been head of mobile communications since 2011, during which time the company became the biggest seller of smartphones and expanded into tablet computers.
In October, the telecommunications unit posted a 74 percent drop in quarterly operating profit as competition crimps profit margins.
Three lower-ranked executives of the mobile business, including president of strategic marketing Lee Don Joo, were removed from their current positions due to weak performance, Yonhap News said, without citing anyone. Samsung declined to comment on the Yonhap report.
The leadership revamp is the latest change at Samsung Group, which comprises more than 70 companies. Chaebols, as the family run conglomerates are known, are under pressure from the government to unwind complex structures that enable a web of companies to be controlled with a fraction of the stock.
“Samsung’s decision to retain the top executives at their current posts, despite many rumors, is a signal that the company will focus on inner stability rather than point fingers,” said Claire Kim, a Seoul-based analyst at Daishin Securities Co. “The announcement is also a signal that Lee Jae Yong has decided to empower the three CEOs and support them as they help him through the restructuring process.”
Under Chairman Lee Kun Hee, Samsung Electronics became the largest producer of phones, semiconductors and TVs, and the largest manufacturer by revenue in 2013 with sales of 229 trillion won ($205 billion). Revenue this year is projected to drop to 206 trillion won, according to analyst estimates.
The 46-year-old Lee Jae Yong has already started to put his stamp on Samsung Group with $8 billion in proposed deals, including the disposal of stakes in chemicals and defense businesses, IPOs of two family controlled companies and a $2 billion stock buyback by its electronics company.
“The market sees today’s decisions as Vice Chairman Lee’s decisions, that he’s the one in charge,” Lee Jin Woo said.
With the company in transition, the younger Lee may wait until he formally succeeds his father before making bigger management changes, according to Chung Chang Won, an analyst at Nomura Holdings Inc. in Seoul.
“There may be rearrangements once the vice chairman takes over as chairman,” Chung said.
Electronics is the biggest part of Samsung Group, generating more than two-thirds of revenue. The company wants to reduce its reliance on Galaxy devices through reinvention as a purveyor of Internet-connected homes and cars.
Samsung Electronics is investing in its chip unit, spending $15 billion on a new plant in South Korea, as it tries to revive growth in smartphones, the biggest contributor to earnings during the past three years.
While Samsung remains the world’s largest smartphone vendor, its grip is slipping. The company’s market share dropped to 24.7 percent in the third quarter, compared with 35 percent a year earlier, according to Strategy Analytics. Xiaomi displaced Samsung as the biggest smartphone vendor in China in the second quarter, according to researcher Canalys.