Uncertainty heightens over Samsung as heir back to prison

A Seoul court on Monday sentenced Samsung heir Lee to two and a half year years in prison, in a retrial of a bribery case involving former President Park Geun-hye and ordered him returned to prison.

Seoul: Samsung Group is once again facing turmoil as its de facto chief, Lee Jae-yong, was again imprisoned in a bribery case, sparking worries that uncertainties may further increase over business and investment plans by the global tech behemoth in the post-pandemic era.

A Seoul court on Monday sentenced Samsung heir Lee to two and a half year years in prison, in a retrial of a bribery case involving former President Park Geun-hye and ordered him returned to prison.

The Seoul High Court gave Lee, vice chairman of Samsung Electronics Co, the prison term for bribing Park and her longtime friend, Choi Soon-sil, to win government support for a smooth father-to-son transfer of managerial power at Samsung, the country’s top conglomerate.

Park was later impeached and ousted from the presidency for corruption and abuse of power.

He was sentenced to five years in prison but was freed in 2018 after the Seoul High Court reduced the sentence to 2 1/2 years, suspended for four years.

Samsung has been thrown into full emergency mode as Lee’s signature drive, “New Samsung,” may fall apart amid its efforts to overcome uncertainties caused by the novel coronavirus pandemic, reports Yonhap news agency.

Industry observers said Lee’s absence is likely to delay or stop Samsung’s key business decisions, such as merger and acquisition (M&A) deals, as foreign rivals prepare for new opportunities in the post-pandemic era.

Lee’s incarceration comes at a time when the group’s crown jewel, Samsung Electronics, the world’s largest memory chip and smartphone maker, is facing challenges from its rivals.

SK hynix Inc, the No. 2 player in the memory sector, recently announced a deal to acquire Intel’s NAND business to catch up to Samsung Electronics.

In the smartphone business, Apple has been sharply increasing sales of its first 5G smartphone, the iPhone 12, to dethrone its South Korean competitor.

According to market researcher Strategy Analytics, Samsung Electronics had a market share of 19.5 per cent in terms of smartphone shipments last year, which was the first time since 2011 that its market share dropped below 20 per cent.

For the whole of 2020, Samsung Electronics forecast upbeat earnings, estimating its operating profit to reach 35.95 trillion won ($32.5 billion), up 29.4 per cent from a year earlier, with its sales to climb 2.54 per cent on-year to 236.26 trillion won.

But apart from its robust earnings performance, Samsung Electronics’s push to clinch M&A deals, or high-profile business deals, may face stumbling blocks, reports Yonhap.

The tech giant’s last major M&A deal came in 2016 when it acquired U.S.-based automotive giant Harman International Industries.

Lee’s absence may also disrupt the tech giant’s plan to expand its non-memory business.

In April 2019, Samsung Electronics unveiled a vision to become the world’s No. 1 logic chipmaker by 2030 by investing 133 trillion won and bolstering its competitiveness in the system LSI and foundry businesses.

Lee’s incarceration will be also a big blow for Samsung’s efforts to revamp its public image tarnished by political ties and unlawful and unethical practices with enhanced corporate culture under the new leadership.

Last year, Samsung launched an independent compliance committee to better improve its compliance culture, seeking to prevent and wipe out any illicit or unethical activities.

For Lee, reimprisonment may signal disruption for his smooth succession to take control of the group following the death of his father, Kun-hee, in October 2020.

In particular, the latest court decision is likely to negatively impact the ruling against Lee in a separate legal battle over his succession issue.

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