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What’s Next for Samsung as Its Iconic Chairman Dies at 78

On October 25, the richest man in South Korea, the 35th most powerful person in the world, the man behind transforming Samsung from a national to a truly global company and the chairman of the Samsung Group, Lee Kyun-hee, passed away. He is survived by his wife, two daughters, one son, and a $21.6 billion net worth along with a company with total assets valued at around $375 billion!

The third son of Lee Byung-chul, the founder of Samsung Group, was born on January 9, 1942 at a time when Korea was under Japanese occupation. Destiny often plays out cruel games of irony; little did humanity knew that one day this son, born during the Japanese occupation would turn the tables against the Japanese. So, the story of the boy began very humbly. A wrestler in high school, who would go on to have an economics degree from Waseda University in Japan and later on an (incomplete) master’s degree programme from George Washington University in Washington DC. This man would wrestle with the future world of industries, reshaping the South Korean economy, leaving many rivals perplexed.
In the late 1960s, Samsung Group under the leadership of Kyun-hee’s father, Lee Byung-chul, was making an entry to the electronics industry. It formed several electronics-related divisions, such as Samsung Electronics Devices, Samsung Electro-Mechanics, Samsung Corning and Samsung Semiconductor & Telecommunications, and built the facility in Suwon. Its first product was a modest black-and-white television set.

Lee Kyun-hee started his career at Tongyang Broadcasting Company, a Samsung affiliate at the time, in 1966. He worked at Samsung C&T, the conglomerate’s construction and trading firm, before being named vice chairman of Samsung Group in 1979. When he became chairman in 1987, he took from his father a fixation on planning for the far future, even when times seemed good. When Mr. Lee took the helm at Samsung Group on 24th of December 1987, two weeks after the death of his father and the conglomerate’s founder, Lee Byung-chull, many in the West knew the group’s electronics unit only as a maker of cheap televisions and unreliable microwaves sold in discount stores. In a declaration now known as the ‘Frankfurt Declaration’, he had his executives gather in the German city in 1993 and called for a radical change in the company’s approach to quality, even if it meant lower sales. For days, he lectured the executives, urging them to bury old ways of working and thinking. “Change everything,” he said, “except your wife and children.” In 1995, as part of the emphasis on quality, he visited a Samsung plant in the town of Gumi after a batch of cell phones was found to be defective. What happened next became legend. According to “Samsung Electronics and the Struggle for Leadership of the Electronics Industry,” a 2010 book on the company by Tony Michell, the Gumi factory’s 2,000 workers gathered in a courtyard and were made to wear headbands labelled “Quality First.” Mr. Lee and his board of directors sat under a banner that read “Quality Is My Pride.” Together they watched as $50 million worth of phones, fax machines and other inventory was smashed to bits and set ablaze. The employees wept.

Samsung became the world’s largest producer of memory chips in 1992 and is the world’s second-largest chipmaker after Intel. In 1995, it created its first liquid-crystal display screen. As destiny plays out cruel games of irony, this time it was turn of Lee Kyun-hoo to turn the tables at the Japanese, who occupied Korea during his birth. The iconic Japanese company, Sony, had not invested in large-size TFT-LCDs, contacted Samsung to cooperate, and, in 2006, S-LCD was established as a joint venture between Samsung and Sony in order to provide a stable supply of LCD panels for both manufacturers. S-LCD was owned by Samsung (50% plus one share) and Sony (50% minus one share) and operates its factories and facilities in Tanjung, South Korea. At the end of 2011, it was announced that Samsung had acquired the stake of Sony in this joint venture. Thus, ten years after Samsung Electronics created its first LCD display, it beat hands down the Tokyo-based Sony to become the top seller of flat-screen TVs in 2006, the same year its market value exceeded $100 billion, it was revenge served sweet. But he was not a man to rest on his laurels. Just four years after that acquisition, in 2010, Samsung introduced the Galaxy-branded smartphone running Alphabet Inc.’s Android software, which helped it pass Apple as the world’s biggest smartphone maker in 2011 in terms of units sold. By introducing the Galaxy Note in 2011, Samsung created a new product niche known as the phablet, a smartphone-tablet hybrid. The Samsung juggernaut kept on rolling, fuelled by the insatiable hunger of this man. It gobbled up the sales of Nokia, the world’s largest mobile phone manufacturer since 1998, to become the world’s largest mobile phone manufacturer in 2012.

But with great momentum comes greater costs and dividends. His aggressiveness was often mired in scandals and controversies. In 1996 he was convicted of bribing President Roh Tae-Woo but was pardoned by President Kim Young-sam. This was followed by another controversy when allegations were raised against Samsung for using slush funds to bribe influential government officials; he took full moral responsibility and stepped down in April 2008. He was fined by Seoul Central District court an amount of $98 million but was later on pardoned yet again by another President on grounds of helping the country’s successful bid to host the 2018 Winter Olympics in Pyeongchang. Lee, who resigned from the board of Samsung Electronics in 2008 amid the controversies, returned as chairman in March 2010, telling employees the business was “facing a real crisis.” “In 10 years, the majority of products that represent Samsung may no longer exist,” he said in a statement announcing his return. “We must have a new start. There is no time to hesitate.” He continued in this position until 2014, when he suffered an incapacitating heart attack and his son, Lee Jae-yong, became the Samsung group’s de facto leader.

The relay race of Samsung to rise to the top of global economic dominance started with the hands of Lee Byung-chull, the baton was passed over to his most efficient heir, who brought the company from just another multinational to a truly global market leader, in the process making it the richest South Korean chaebol or business conglomerate, whose revenue is almost one fifth of South Korea’s GDP! With the death of Lee Kyun-hee, an era in Samsung has ended, the baton is yet to be passed, but the race is still open with Samsung poised to make a dash to the ever-receding finish line.

-Aishik Bhattacharya (Opinion Writer at IndianFolk.com and Senior Research Fellow at IACS Kolkata)

References:

-Lee Kun-hee, Who Built Samsung Into a Global Giant, Dies at 78, The New York Times

-Lee Kun-hee, Korean Icon Who Transformed Samsung, Dies at 78, Bloomberg

-Samsung Electronics Chairman Lee Kun-hee passes away at 78, Money Control

Picture Credits: Reuters / asia.nikkei.com



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