By Elizabeth Koh
SEOUL -- Few companies rode the tech industry's hardware boom
higher than Lee Kun-hee's Samsung Electronics Co.
In the 1990s, the company muscled into living rooms with
flat-screen TVs and then slid into consumers' pockets in the last
decade with smartphones rivaling Apple Inc.'s iPhones. Meanwhile,
Samsung became a ubiquitous name on multiple continents.
That era closed for the South Korean tech giant on Sunday with
Mr. Lee's death. It followed years with the late Samsung chairman
incapacitated in a hospital bed following his 2014 stroke.
Now, as his son, Lee Jae-yong, prepares to formally take the
reins, the tech landscape looks much different, with the industry's
gravity having shifted from products to the software that controls
them, from artificial intelligence to apps to consumer data.
But Lee Jae-yong's Samsung has a big problem -- it still looks
like the Samsung of his father's past.
Over the past six years, Samsung, unlike Apple, has failed to
create homegrown software or services that would drive loyalty for
its array of products. It is still a successful, though vulnerable,
maker of nearly every major electronics product on Earth, plus many
of the core components required to assemble them, from smartphone
displays to a computer's gigabytes of storage.
Instead of a transformation under Lee Jae-yong, Samsung has
struggled as Chinese rivals matched them on features and beat them
on price. Amazon.com Inc. and Alphabet Inc.'s Google, with greater
expertise in services than Samsung, have launched popular home
speakers or smartphones.
Lee Kun-hee, who was 78 when he died, was known for making
massive bets, even imploring executives to "change everything
except for your wife and children." In 1974, he was so sure that
Samsung should venture into semiconductors that he invested his
personal money to buy a 50% stake in the financially troubled Korea
Semiconductor.
His father, Samsung's founder Lee Byung-Chul, eventually was
persuaded. It proved to be game changing: Samsung in the 1990s
leapfrogged Japanese rivals and now memory chips represent the
company's biggest cash cow.
A clear management style has yet to emerge for Lee Jae-yong --
who goes by Jay Y. in the West -- and is 52, trilingual and
Harvard-educated.
His father and grandfather oversaw Samsung during the Japanese
colonial period and later in the aftermath of the Korean War,
leaving both with a driving hunger to succeed, said Mike Cho, a
business professor at Korea University in Seoul, who has long
followed Samsung as a South Korean corporate governance expert. It
is unclear what drives Samsung's third-generation leader, he
adds.
"Jay Y. was born into a family which was by nature rich, and
already established," Mr. Cho said. "He has a very different kind
of education."
Little is expected to change right away at Samsung, where Lee
Jae-yong was the conglomerate's de facto leader in his father's
stead since 2014, industry experts say. Mr. Lee, like his father,
leaves the day-to-day operations to three Samsung Electronics CEOs,
though any major decision must have his blessing.
How Lee Kun-hee's shares eventually transfer to his son or two
daughters remains unknown. South Korean officials are expected to
assess the inheritance tax -- which could be as high as 60% for the
Samsung shares -- over the next months.
Mr. Lee has previously said he spends about 95% of his time
focused on Samsung Electronics, the conglomerate's crown jewel. Mr.
Lee's sisters are unlikely to battle their brother for control of
Samsung Electronics as chairman, though they could seek to spin off
other parts of the conglomerate for themselves, said Park Sang-in,
a professor at Seoul National University, who studies succession
planning at South Korea's dynastic companies.
Samsung boasts the world's fifth most-valuable brand, according
to Interbrand, trailing only Apple, Amazon, Microsoft and Google.
But the company's branding has long emphasized product flourishes
over the personalities of the people actually calling the
shots.
Fluent in English, Lee Jae-yong, did hobnob more than his
predecessors after taking over for his ailing father. He cultivated
relationships with Silicon Valley elite, including Apple's Tim
Cook, and even attended the well-known Sun Valley conference in
Idaho.
In a sign of his and the company's standing, Mr. Lee was the
only non-U.S. executive invited to a White House gathering of
industry leaders with then President-elect Trump, just weeks after
the November 2016 election.
His father's poor health long dissuaded Mr. Lee from making more
public appearances, all the more important given South Korea's
culture favoring tradition and hierarchy, Samsung insiders have
said. Until his death, Lee Kun-hee held the title of Samsung
Electronics chairman. His son was bestowed with vice chairman.
He also faces ongoing legal issues. He was convicted of bribing
South Korea's president in 2017 and spent nearly a year in jail.
The case is still being resolved in an appeals court. Last month,
prosecutors indicted him again for financial fraud. Mr. Lee has
previously denied wrongdoing.
In recent years, Mr. Lee's business dealings, partly due to his
father's health and his legal woes, have also remained low-key.
Despite holding close to $80 billion in cash, Samsung hasn't pulled
the trigger on any major acquisitions that could expand the
business empire. Samsung last year did announce more than $110
billion in investments by the end of the decade, though the funds
were largely earmarked for existing lines of business.
What Mr. Lee has said publicly often expresses a desire to step
out of his family's shadow -- and the past. During the bribery
scandal, he promised lawmakers during a 2016 legislative hearing to
"throw away the old ways."
Earlier this year, Mr. Lee issued a rare apology over the
bribery scandal and other issues related to his succession,
promising he wouldn't pass down his role to his children. But he
made no concrete commitments for how he would do so.
"The environment that surrounds Samsung now is completely
different from what it was before," Mr. Lee said at the time.
Write to Elizabeth Koh at Elizabeth.Koh@wsj.com
(END) Dow Jones Newswires
October 25, 2020 09:35 ET (13:35 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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