Samsung Chairman Kun-Hee Lee’s poor health leads to speculation over who will lead Samsung
IT’S a multi-billion company that covers everything from gadgets to construction, but Samsung’s chairman has been seriously ill and ‘vultures’ are circling.
RIGHT now, a tsunami of chatter is sweeping investment banks and trading houses.
Speculation is rife about the future of Samsung, one of the world’s biggest and most powerful companies responsible for a mind boggling 20 per cent of South Korea’s $1.2 trillion GDP.
At 72, the global chairman Kun-Hee Lee has been seriously ill. He recently suffered a heart attack and fears over his health have sparked a frenzy over who will take the reigns of the Samsung empire — a huge family conglomerate known as a chaebol — that runs businesses in everything from heavy industries to fashion.
Technology Spectator’s editor Supratim Adhikari said lawyers and bankers are virtually salivating at the prospect of cashing in on any changes.
“Right now you can kind of imagine they’re like vultures circling around a carcass. There’s going to be so much money will flow out when this happens.” So how did it all come to this?
It’s best known for electronics, but Samsung is actually a behemoth that runs everything from life insurance to chemicals, engineering and construction.
After starting as a humble market trading business selling dried fish in 1938, it grew to a huge corporation under the guidance of South Korean leaders. It now has more than 80 companies, 17 of which are listed, employs 20,000 people and single-handedly boosted South Korean exports by 2.5 per cent in the last year.
It’s no wonder the country is often dubbed the “Republic of Samsung”.
“You often hear you can be in a city like Seoul in a building built by Samsung, using a clock built by Samsung, using a Samsung credit card, taking money out of a Samsung account,” Mr Adhikari said.
“They’re very pervasive at a domestic level. They’re not alone in that. LG electronics is the same, it’s the standard in South Korea, they have great big conglomerates like Sony and Mitsubishi [in Japan].”
Chairman of the group is Kun-Hee Lee, who is estimated to be worth $13.7 billion after taking control of the company in 1987, according to Forbes.
He’s credited with revolutionising it into an electronics powerhouse dedicated to quality — famously building a huge bonfire in front of 2000 workers in 1995 and burning 150,000 substandard products, telling workers to ‘change everything.”
Having survived a conviction for tax evasion, later being pardoned by South Korea’s president, all eyes are now turning to who will take the helm if and when he steps down.
The heir apparent is Lee’s son Lee Jae-Young, 45, who is currently vice chairman of Samsung Electronics. Kun-Hee Lee also has two daughters; Lee Boo-Jin who is worth $1.5 billion and is the first female president at Samsung as well as CEO of a luxury lodge, and Lee Seo-Hyun who is also a president within the Samsung Group.
His wife Ra-hee Hong also owns a $1.5 billion stake in Samsung, Forbes reports.
WHAT WOULD A RESTRUCTURE LOOK LIKE?
Mr Adhikari said the hospitalisation of the chairman has raised a huge amount of interest in what will happen next.
“The most important aspect is that its family-controlled. It’s almost non-negotiable from their perspective,” he said.
Samsung Electronics Australia was unable to comment on the issue, but reports suggest the company is about to undergo a major overhaul to shore up the Lee family’s control and help them avoid inheritance tax which could wipe out tens of millions of their fortune.
One theory is that a stock market listing of Samsung Everland, the entertainment arm that runs amusement parks, zoos and fashion and is nearly 50 per cent family owned will be used to help the family maintain control.
But the process is made extremely complex by the convoluted ownership of the 17 listed companies inside the group. Check out a diagram of ownership here.
It’s just one of many headaches for the huge company which is finding it much harder to make money in the saturated mobile phone market. Samsung announced today it’s operating profit would drop 25 per cent on year in the second quarter of 2014, as cheap Chinese devices flooded the market and the company saw a slowdown in overall growth.
“It’s essentially a market that has become very difficult for Samsung. Their last three profit guidances have showed that phones and tablets just don’t sell as much as they used to one year ago,” Mr Adhikari said.
“It’s become a question of how does the electronics business pivot to developed markets … As a company Samsung is starting to realise we need to help other parts of the conglomerate to find their feet and become globally competitive.”
Changes at the top are unlikely to affect the millions of Samsung users in Australia, Mr Adhikari said.
For now, Lee Kun-hee continues to run the company while travelling to Hawaii to avoid South Korea’s cold winters, while Samsung churns out watches and devices to ride out the lull in their electronics business.
What happens next is anyone’s guess.
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