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Samsung Operating In ‘Emergency’ Mode After Jailing Of Heir

A key partner of Australian carriers, consumer electronics and appliance retailers Samsung is today operating in ‘Emergency Mode’ following the jailing of the heir to the Company and a key person in the decision making about the future of the South Korean Conglomerate.

The jailing of Samsung Electronics Vice Chairman and heir to the multibillion-dollar Company Lee Jae-yong to two years and six months in jail for bribery comes at a crucial time for the business, which is facing key investment decisions, Lee is expected to only have to server 1 and a half years of his sentence having already been in prison for 12 months in 2019 and 2020.

Multiple sources at the world’s largest Smartphone and TV maker largest spoke of a sombre mood, with many expressing regrets about the court’s decision and worries about the tech giant’s mid-term strategies according to the Korean Herald with one senior executive claiming that “Aside from day-to-day operations, the leader’s vacancy literally means an emergency at Samsung,” said a company official.

Insiders claim that the lack of access to Lee who is only allowed 10-minute visits in prison by outsiders, could halt major investment decisions, causing concern that Samsung may fall behind its global rivals in the fast-changing tech industry especially when it comes to investments in new generation processors used in many of their products and those of its competitors who buy components from Samsung.

The three biggest operations of Samsung’s business — semiconductors, IT and mobile communications and home appliances – will be led by CEOs Kim Ki-nam, Koh Dong-jin and Kim Hyun-suk however these executives are unable to enforce expansion plans for the business with Lee absent with a ‘contingency’ meeting set to be held next week to discuss how the Company will operate moving forward.

According to the Korean Herald the business support task force, established by Lee after the disbandment of Samsung’s corporate strategic office in 2017, will play a central role in coordinating the Samsung affiliates in Lee’s absence. President Chung Hyun-ho, a close aide to Lee, is heading the team.

While in prison, the Samsung heir will likely be briefed on major business affairs by executives occasionally, as was the case during his first time in jail in 2017 however this is difficult due to the restrictions to access that authorities have placed on access to Lee die to COVID-19 restrictions.

The number of visitors is limited to a maximum of two and the time is restricted to 10 minutes under 2.5 metre distancing rules.

“It would be impossible to discuss and make important business decisions during the allowed 10 minutes,” said another Samsung official. “Lee could use videoconferencing, which has recently been allowed by the correctional authority, but conditions wouldn’t be as good as before.”

Lee’s top priority was to be aggressive in the system-on-chip and foundry markets in 2021 as manufacturers struggle to get access to processors.

One of the most urgent issues was getting access to cutting-edge extreme ultraviolet lithography equipment from the world’s single largest provider ASML. This would give Samsung a competitive edge in production of chips with 5-nanometer process and smaller technology.

On the day of Lee’s verdict, some Taiwanese media outlets reported that archrival TSMC, the world’s biggest foundry Company, had reached 100 percent capacity in their manufacturing operation.

Recently TSMC announced that it will make capital expenditures of $25 billion to $28 billion this year as demand for foundry chips surge amid the growing contactless industry.

This is far larger than Samsung’s 12 trillion won investment expected to be made in the non-memory business.

Recently, Intel, one of the biggest foundry customers both for Samsung and TSMC, chose the Taiwanese company for mass production of its i3 CPUs on its 5-nm process node this year, and more on 3-nm node next year.

“How could Samsung beat TSMC without the leader,” asked one senior official at Samsung.

As part of Samsung’s foundry expansion plan, Lee flew to the Netherlands to meet with ASML’s top brass in October, despite the pandemic risks.

It was Lee’s decision to pour a total of 133 trillion won to make Samsung the No.1 in the logic chip market by 2030, which was announced in front of President Moon Jae-in in 2019.

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