Decisions on M&A Deals and Investment Delayed
Uncertainty is hanging over Samsung Electronics as the outgoing President Moon Jae-in did not pardon vice chairman Lee Jae-yong and labor-management conflict is deepening. Accordingly, Samsung Electronics may suffer a setback in promoting its new businesses that require bold investment and quick decision-making.
An inability to invest in new businesses, such as artificial intelligence (AI), 6th-generation mobile communication (6G) and robots, is highly likely to undermine Samsung’s sustainability.
To promote M&As or invest in new businesses, a quick decision by the head of Samsung is a prerequisite, but Lee's return to the front line of management is being delayed.
Lee’s parole period will end in August, but his employment will be limited for five years, as his reinstatement has not been realized. In other words, if Lee is not pardoned and rehabilitated, it will inevitably create a vacuum in Samsung Electronics’ management for nearly 10 years.
As Lee’s vacancy continued for more than several years, many restrictions have been placed on decision-making to discover and develop new growth drivers. As a result, large-scale investments and M&A deals have not been made. This is in stark contrast to other groups such as LG and SK, where group chairmen directly lead and promote new businesses.
In particular, the labor union of Samsung Electronics is demanding an unreasonable wage increase and the labor is at loggerheads with the management. This is also a negative factor.
The Samsung Electronics Labor Union has some 6,000 members, accounting for only 5.3 percent of its 113,000 employees. However, experts say that the labor union is maintaining a non-cooperative attitude in negotiations with the management and recently held a rally, together with members of the Democratic Party and the Justice Party, to condemn the Samsung Electronics Labor-Management Council. The hostile union is highly likely to act as a destabilizing factor in the future.
“In the case of new businesses currently in their early stages, investment for an initial market entry is more important than anything else,” said an official of the Korean business world. “Considering this factor, a delay in Lee's comeback and a conflict with the labor union may spark off a drop in Samsung's competitiveness in the future.”