Samsung thrives as Seoul contemplates pardon from company heir

SEOUL, South Korea (AP) – Pressure is mounting on South Korean President Moon Jae-in to forgive Samsung heir Lee Jae-yong, who has returned to prison after his conviction in a massive corruption, even though business rarely looked better South Korea’s biggest company.

Lee is just the latest South Korean business leader to run his business behind bars, communicating his decisions through visiting business executives. But his imprisonment is causing nationwide criticism over the future of the tech giant in the country sometimes referred to as the “Republic of Samsung”.

Many people – from business leaders and editorial editors to Buddhist monks even – have urged Moon to free Lee for the sake of an economy heavily dependent on Samsung’s tech exports. They fear that Lee’s imprisonment could jeopardize Samsung’s speed and decision, hampering its competitiveness in the rapidly changing tech industry.

Lee has been in jail for nearly four months and few expect him to serve his full sentence until July 2022. There is speculation Moon could release him on Buddha’s birthday, which falls. Wednesday.

There is also Liberation Day in August, which celebrates Korea’s independence from Japanese colonial rule at the end of World War II. It has also often brought presidential pardons to high profile politicians and businessmen.

Moon’s office said it would examine both the intensifying competition in the semiconductor market and the public’s feelings about fairness before deciding to forgive Lee.

Lee heads Samsung as vice president. He is also the richest person in the country. He is serving a 2.5-year sentence for bribing then-President Park Geun-hye and his close confidant, who are serving longer prison terms, to gain government support for a 2015 merger between two affiliates of Samsung which has strengthened its control over the corporate empire.

Samsung’s latest results suggest it is doing very well.

The company posted an almost 50% increase in operating profit, and its sales of $ 58 billion were the highest on record in the first three months of the year. Demand for its major memory chips, televisions and other products has increased as the pandemic has forced millions to stay at home. And the sleek Samsung Galaxy smartphones and tablets are the biggest competition for Apple iPhones and iPads.

Samsung has announced ambitious plans to expand its manufacturing of computer chips. Last week, it announced it would invest 171 trillion won ($ 151 billion) through 2030 in higher margin logic chips and its foundry business for contract chipmaking, beyond that. of its dominance over memory chips. The company expects demand for advanced chips to increase in the coming years, supported by emerging technologies such as fifth generation (5G) wireless networks, artificial intelligence and self-driving cars.

Still, analysts say Samsung is falling further and further behind Taiwan Semiconductor Manufacturing Co. in the race for high-tech chips. The world’s largest contract chip maker, TSMC controls 55 percent of the global foundry business compared to Samsung’s 17 percent, according to South Korea’s Ministry of Commerce.

Both could be threatened by US efforts to reduce US dependence on Asian supply chains and rebuild the declining US chip industry in response to chip shortages that have hampered US auto manufacturing. these last months.

In a statement to The Associated Press, Samsung said Lee’s role is to “contribute to the overall strategic direction of the company and to make decisions related to future growth using his knowledge and global network. of business leaders. ” The company declined to comment on calls for Lee’s release, nor did it indicate how often company officials visit him.

“It’s not difficult for Lee to run the prison business through his visitors, and it’s not like he’s ever ruled Samsung like an almighty king,” said Chung Sun-sup. , Managing Director of the business analysis company Even though Lee is the grandson of the Samsung founder and the family’s third-generation coxswain, big decisions are still weighed by the board, he noted.

“But who knows what Samsung is missing when Lee isn’t visiting commercial sites or traveling overseas to find new opportunities?” he said.

Lee’s jail comes at a time when Samsung is expected to push for a major overhaul of its semiconductor business, said Lee Seung-woo, senior analyst at Seoul-based Eugene Investment and Securities.

Samsung’s rise as a global technological powerhouse has relied on its dual strength in parts and finished products. But that turns out to be a disadvantage in its competition with TSMC, as large customers like Apple shift their orders to TSMC to avoid relying on chips made by a competitor.

Samsung should consider bold steps, such as splitting its foundry business into a separate company and listing on the U.S. stock market to allay customer concerns, Lee said.

“Lee Jae-yong clearly has a role to play,” he said. “Lee could meet with Tim Cook (Apple CEO) to ask Apple to invest in the new foundry company.”

Samsung’s day-to-day operations are primarily managed by co-CEOs who each run its semiconductor, smartphone and consumer electronics divisions. Samsung reaped strong profits from Lee’s previous jail stints in 2017 and 2018, when it finalized a deal to acquire U.S. auto electronics company Harman. It eased the nervousness about a possible void in decision-making.

Legal problems have long plagued the company. Lee’s late father, his former chairman Lee Kun-hee, received suspended sentences in 1996 and 2008 for crimes such as corruption and tax evasion.

The scandal that gripped Lee Jae-yong has once again highlighted the traditionally close ties between the “chaebol,” or South Korean family conglomerates, and the government. Park was ousted and jailed in 2017 after months of protests by millions.

Moon has avoided the issue of forgiveness for months, after taking office swearing to curb the excesses of the Chaebol families after winning the by-presidential election after Park’s ouster.

South Korea has long been lenient on white-collar crime, letting convicted tycoons run their businesses from prison. Officials say it’s better for the economy, even though the crimes committed by chaebol leaders usually put personal interests ahead of corporate concerns.

SK Group Chairman Chey Tae-won held nearly 1,800 meetings with his lawyers and other visitors in 17 months until July 2014, while serving a four-year prison sentence for embezzlement and other crimes, according to Justice Department comments to lawmakers.

Hyundai Motor Corp. reportedly set up a “liaison office” nearby to receive guests and staff visiting its former president Chung Mong-koo after his arrest in 2006 for embezzling company funds to bribe officials.

Chey and Chung received the presidential pardon, as did Lee’s father.

Calls for Lee’s release show that Samsung still wields undue influence, said Park Sang-in, professor of public enterprise policy at Seoul National University. He believes forgiving Lee would hurt public confidence.

“Has there ever been a time when a pardon from a chaebol boss really helped a business or the Korean economy?” No, not even once, ”Park said.

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