Group's Heir Apparent Facing Indictment
Amid a growing sense of a crisis among Korean companies due to the resurgence of COVID-19, concern is growing over a triple threat facing Samsung Group.
The prosecution has not yet decided whether to indict Samsung Electronics vice chairman Lee Jae-yong for his alleged involvement in illegal activities committed by group officials to ensure a transfer of managerial control to him. If the uncertainty continues to linger, it could make it difficult for the group to make aggressive investments and pursue large-scale M&A deals.
A legislative threat coming from the government and ruling party’s move to revise the Insurance Business Act and Commercial Act is also weighing on Samsung Group. In particular, if the Insurance Business Act is revised as promoted by the government, Samsung Life Insurance will have to dispose of its stake in Samsung Electronics. Samsung Life Insurance has to sell more than 20 trillion won worth of Samsung Electronics shares. Samsung Life Insurance will have to pay 5 trillion won in corporate tax alone after selling off the stake. In this case, Samsung's corporate governance structure could be greatly shaken.
Samsung Electronics is also facing challenges from foreign competitors. Taiwan's TSMC, which is the world's No. 1 foundry company, has decided to build a 2-nanometer semiconductor plant ahead of Samsung Electronics by spending 22 trillion won. U.S. chipmaker Nvidia is seeking to acquire ARM, the world's largest semiconductor design company.
The prosecution is expected to indict Lee, ignoring the recommendation of the Investigation Review Committee not to indict him and stop all investigations against him. “If the prosecution does indict Lee, it cannot avoid criticism for going out of its way to go after him," said Hong Ki-yong, a professor of business administration at Incheon National University. "Lee's indictment will pose a risk to the entire Korean economy."