Many Important Issues Waiting for His Decisions
As parole was decided for Samsung Electronics vice vhairman Lee Jae-yong, who was imprisoned in connection with the Choi Soon-sil scandal, attention is focusing on his moves.
The Justice Ministry decided to grant parole to Lee on Aug. 9. Lee will be released on Aug. 13, about seven months after he was sentenced to two and a half years in prison on Jan. 18.
The parole decision falls short of expectations of those in the Korean business community, who have been calling for a pardon for Lee. But they can breathe a sigh of relief as Samsung Group’s risks caused by the absence of a decision maker will be eased.
While Lee was in prison, Samsung Electronics saw its market share gap with foundry rival TSMC widen. And even Intel declared reentry into the foundry business, adding pressure on Samsung.
In the memory sector, Samsung Electronics’ leadership is under threat, with Micron Technology and SK Hynix outpacing it in technology development and production of 176-layer NAND flashes and DDR5 DRAMs, respectively.
With Lee's return, Samsung Electronics is expected to accelerate large-scale investments in the United States and other countries. Following the Korea-U.S. summit in May, Samsung announced its plan to invest US$17 billion to build a new foundry in the United States. But it has yet to select a plant site. Reuters recently reported that Samsung Electronics' major investments and M&A projects will begin when Lee is released.
Lee’s return will also accelerate decisions regarding Samsung SDI's decision on the establishment of a U.S. battery plant and Samsung Biologics' production of COVID-19 vaccines, analysts say.
Samsung Electronics may resume M&A activities, which had stopped since acquiring Harman, a U.S. automotive electronics company, in November 2016. The company said at a conference call on July 29 that it will carry out meaningful mergers and acquisitions within three years, based on its cash holdings of more than 100 trillion won. It announced that it is considering making M&A deals in various sectors, including artificial intelligence (AI), 5G mobile telecommunications and automotive electronics.
However, even if Lee is released on parole, he is likely to face legal restrictions in playing his decision-making roles. He may not come back as the CEO of Samsung Electronics as the Act on the Aggravated Punishment, etc. of Specific Economic Crimes can impose restrictions on Lee’s employment. If the minister of justice does not make Lee’s case an exception, his management activities may be restricted.
Some analysts predict that it will be difficult for Lee to fully play managerial roles as trials are currently underway regarding allegations that he was involved in the unfair M&As between affiliates, and a separate trial on the alleged unlawful propofol administration will begin soon.