Samsung/JY Lee: dynast must be diplomat as well as repairman

One genius ends up feeding 200,000 people. This was the management theory of late Samsung group chair Lee Kun-hee. He built the South Korean conglomerate into a $280bn giant. National as well as family expectations burden his son, who became executive chair of Samsung Electronics on Thursday. Jay Y Lee is stepping into the position at the most politically challenging time in the history of Samsung.

Lee’s appointment fills an eight-year long management vacuum at the top of Samsung. His succession was complicated by political volatility and a prison term for bribery and embezzlement. He was pardoned in August.

While Lee always held the status accorded to the Samsung heir, his new title will increase his authority. He had been the only head of a big conglomerate in South Korea stuck with the vague role of vice-chair.

Shares in Samsung C&T, regarded as the group’s holding company, rose more than 6 per cent on Thursday.

That is no help to the profitability of Samsung Electronics. Third-quarter earnings reported on the same day missed expectations. Operating profits fell 31 per cent to Won10.9tn ($7.7bn).

Shares are down a quarter this year and trade at 14 times forward earnings. That is still a 40 per cent premium to TSMC.

Samsung has outpaced its Taiwanese peer technologically, becoming the world’s first company to mass produce next generation 3nm chips. But Samsung is set to lose its number one position in global chip sales to TSMC because it lags behind in contract chips. Its other core business, smartphones, is unlikely to offset that weakness.

The executive chair needs to demonstrate political judgment as well as business acumen. Many nations hope Samsung will help them expand domestic chip capacity. The stakes are highest in the chip wars between the US and China.

Lee may not be a genius. But he does have the budget to hire smart advisers and the hard-earned life experience to balance their views in his decision-making. Geopolitical experts will be just as useful to him as technologists.