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Mayor of Gwangju City Makes Unreasonable Request to Samsung Electronics
Political Approach to Business
Mayor of Gwangju City Makes Unreasonable Request to Samsung Electronics
  • By Jung Suk-yee
  • September 12, 2018, 11:27
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Gwangju Mayor Lee Yong-Seop (center) visited Samsung Electronics’ Gwangju Plant on September 11.
Gwangju Mayor Lee Yong-Seop (center) visited Samsung Electronics’ Gwangju Plant on September 11.

It has been found that Gwangju Mayor Lee Yong-Seop asked Samsung Electronics to invest in the city regarding automotive electronics and artificial intelligence (AI). Much attention is being paid to how the company will respond to the request for unplanned investment.

The mayor and Kim Hyun-seok, head of the Consumer Electronics (CE) Division of Samsung Electronics, met with each other on September 11 at the Hanam Industrial Complex located in Gwangju. “Samsung Electronics is planning to invest 180 trillion won (US$162 billion) in its future growth drivers, including 130 trillion won (US$117 billion) in South Korea, for three years to come and I hope Samsung will make an investment in Gwangju with regard to automotive electronics and AI,” the mayor said at the meeting. In addition, the mayor asked the company to increase its high-end consumer electronics production in the city after the partial production line relocation to Vietnam in 2016. The head of the division answered that the company would think over the matter.

According to those in the know, it is not easy for Samsung Electronics to take it lightly in that the mayor is a heavyweight in the present government. The mayor was the first vice chairman of the Presidential Committee on Jobs earlier. In 2016, the ruling party adopted automotive electronics manufacturing in the city as its general election pledge. It became a presidential election pledge in April 2017 and a national policy goal of the present government in July last year.

Those in the business community, in the meantime, mentioned that the request may mean corporate investment used for political purposes. Samsung Electronics released its plan for the 180 trillion won investment last month and the request is another matter requiring additional investment.

Many are criticizing the mayor and the government, saying he never took the company’s situation into account and the government is becoming socialistic in corporate matters. Most of the 130 trillion won to be invested in South Korea is slated to go to Industry 4.0-related items like semiconductors and 5G communications equipment. Samsung Electronics’ Gwangju Plant, meanwhile, is producing home appliances such as air conditioners and refrigerators, including a small amount of premium consumer electronics products targeting the South Korean market. Three years ago, Samsung Electronics shut down its old kimchi refrigerator production lines in the plant for cost competitiveness. In short, Gwangju is not a place where the mayor’s request can be met. “Unlike mobile phones, consumer electronics products have transport-related limitations, and this is why Samsung Electronics is maintaining its production lines in South Korea,” said an industry source, adding that facility expansion for more production in the region makes no sense under the circumstances.

During the meeting, the mayor also said that Samsung Electronics and Hyundai Motor Company may be able to work with each other to create automotive electronics-related jobs in the city. Insiders are criticizing the conception in that Samsung’s automotive electronics business is limited to semiconductor chips, no additional investment in automotive electronics can be made in the consumer electronics plant in the city, and Samsung is planning to beef up its semiconductor business via Suwon, Giheung and Pyeongtaek.

“Samsung already looked into each place of business before the announcement of the investment plan, reaching a conclusion that Gwangju is no viable option,” an entrepreneur pointed out, continuing, “The mayor’s request is nothing but political pressure on corporate decision making.” Another one remarked that additional investment in Gwangju is likely to do harm to other local governments with the size of the investment already fixed.

Many entrepreneurs say that the mayor chose Samsung Electronics for his first company visit in order to distinguish himself from former mayor Yoon Jang-hyun, who concentrated on automobile manufacturing with a slogan of one million vehicle production. According to them, the current mayor is planning to turn the city into a hub of future industries by putting pressure on Samsung.

Samsung Electronics is in a dilemma despite the mayor’s tall order not only because he is politically very influential but also because the company failed to maintain a smooth relationship with the former mayor. The fact that Samsung shut down some of its production lines in Gwangju was revealed belatedly in late 2015, and then the former mayor expressed strong discontent with the company. They had a meeting later, but awkwardness did not go away.