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Samsung Electronics Vice Chairman Jay Y. Lee goes to a Seoul court for a trial on March 31, 2022 Samsung Electronics Co. is losing its hegemony in the global semiconductor as a sustained leadership vacuum kept the world’s top memory chipmaker from deciding on key investment plans for the future.Its Vice Chairman Jay Y. Lee, the key decisionmaker of the South Korean tech giant’s long-term strategy, has been on parole since August 2021 after serving 18 months of his 30-month prison term over bribery and embezzlement conviction. But Lee’s parole, instead of a pardon, means he will be unable to return to Samsung management until the second half of 2027, given the country’s law governing special economic crimes.Some domestic business lobby groups reportedly planned to ask President-elect Yoon Seok-yeol to pardon Lee, de facto leader of the nation’s top conglomerate Samsung Group, for the sake of the local semiconductor industry.“Large scale issues such as chip investments and M&As need to be decided by someone, who is in charge of corporate management,” said Lee Chang-han, vice chairman of the Korea Semiconductor Industry Association. “Samsung’s decision-making power has weakened due to the absence of vice chairman Lee, top decisionmaker.”Samsung’s lack of long-term strategy is expected to pose a risk to the entire South Korean semiconductor sector amid the intensifying competition in the global market, industry sources said.The concerns dampened Samsung’s share price. The stock of the country’s largest company by market capitalization lost ground, falling to as low as 66,100 won ($53.2) earlier this month, the weakest since November 2020, despite record sales in the first quarter.SMALLER INVESTMENT THAN COMPETITORSSamsung’s semiconductor investment fell behind competitors' spending. Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s top foundry maker, announced it planned to spend $44 billion on capital expenditure this year alone. Intel Corp. decided to pour $20 billion each for factories in Arizona and Ohio, as well as 80 billion euros ($86.6 billion) into Europe to boost chip capacity there over the next decade. An undated handout shows an employee working inside a TSMC 12-Inch wafer fab laboratory in Hsinchu (Courtesy of Reuters, Yonhap) On the other hand, Samsung aims to invest $17.1 billion in the chip business by 2030. “Investors are concerned over Samsung’s uncertain future due to the lack of leadership,” said an analyst at a brokerage house in Seoul.Samsung is feared to follow the decline in Japan’s semiconductor sector as the South Korean electronics behemoth has yet to unveil long-term visions and strategies, domestic industry sources said.Until the 1970s, the global semiconductor industry was dominated by the US with Intel’s invention of a DRAM in 1971. Japanese players took the throne in the 1980s with high-performance DRAMs required by mainframe computers for corporate servers. Samsung aimed at the market of small and cheap products in the 1990s when personal computer makers became the main customers for DRAMs with the growing use of PCs. To cut costs, Samsung reportedly took a bold move of using European equipment that had been less competitive than Japanese machines. Such strategies allowed Samsung to beat Japanese rivals.Takashi Yunogami, a former semiconductor engineer at Hitachi Ltd., said Japanese chipmakers collapsed and surrendered the market dominance to South Korean makers as they were excessively obsessed with top technology and quality, failing to cope with the rapid change in the global trend.Morris Chang, the founder of TSMC, paid attention to the late Samsung Group Chairman Lee Kun-hee on the success of Samsung Electronics’ semiconductor business.Samsung had Lee Kun-hee, the current vice chairman’s father, but Japanese rivals such as Hitachi, Toshiba Corp. and NEC Corp. did not have such a leader, Chang, a legendary figure in the global semiconductor industry, said in an interview with Taiwan’s Wealth Magazine in February.But the sustained leadership vacuum ramped up risks to Samsung when competitors are boosting their muscle in the global market.Samsung is far behind TSMC in the foundry market where product prices jumped on the world’s semiconductor shortage. TSMC dominated the global foundry market with a 52.1% market share in the fourth quarter of last year, while Samsung accounted for just 18.3%, about a third of TSMC’s share, according to market tracker TrendForce. The Taiwan company is reportedly able to produce 3-nanometer chips ahead of Samsung.In the US, chipmaker Micron Technology Inc. last year started commercial production of the 176-layer NAND for the first time around the world.LEADERSHIP VACUUMSamsung has announced few major investment plans, except for the one to build a $17 billion chipmaking plant in Taylor, Texas, released in November last year. Texas Governor Greg Abbott (left) and Samsung Vice Chairman Kim Ki-nam announce the $17 billion plant deal on Nov. 24, 2021 (Courtesy of Samsung Electronics) The company’s CEO reportedly has authority for spending of about 1 trillion won, while presidents are known to be able to approve investments of 300 billion-400 billion won. That means vice chairman Lee is the only person to make decisions on investment in a chip plant that costs billions of dollars within the company.“It is hard for a professional manager to make decisions on a large-scale investment as they cannot help focusing on short-term performance,” said a local semiconductor industry source.Lee’s parole term ends on July 29, but he will be restricted from getting a job, given the law governing special economic crimes.“Without a pardon, there will be no way to avoid the employment restriction,” said another industry source.Lee also faced difficulties in seeking acquisitions of other companies, a shortcut to securing future growth engines, under parole. Few global companies are willing to sign a deal with a leader with legal risks.Governments around the world became stricter on mergers and acquisitions in the semiconductor industry amid the cut-throat hegemony competition. Germany disapproved of Taiwanese GlobalWafer Co.’s planned $5 billion takeover of German chip supplier Siltronic AG. US-based Nvidia Corp.’s attempt to acquire British chip designer Arm Ltd failed on the opposition of countries such as the UK and China.Samsung may disappear into history or lose a global major status without securing future growth engines in the near term, company officials feared. Global management consulting firm McKinsey said the average life expectancy of companies listed on the Standard and Poor’s 500 shortened to 18 years in 2011 from 90 years in 1935, expecting 75% of those 500 major companies to disappear by 2027.By Shin-Young Parknyusos@hankyung.comJongwoo Cheon edited this article.
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