- Lee Jae-yong's 'long silence' became a crisis for Samsung Electronics? Three-year hiatus since taking office
- Samsung Electronics 'earnings shock', sales increase compared to last year, but operating profit 13% ↓
- Vice Chairman Jeon Young-hyun, what are the three issues Samsung Electronics pointed out after an unusual apology?
- Semiconductor Market Shifts to Supplier → Consumer Focus...Samsung Can't Keep Up with the Flow
- Bureaucratic Organizational Structure, Pointing Out the Cause of Samsung's Fundamental Technological Problems
■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: October 15, 2024 (Tuesday)
■ Dialogue: Park Joo-geun, Leader of Leaders Index
- Old "Future Strategy Office" Resurrection? Without personnel reform, we cannot escape the crisis
* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.
◆ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): "Change everything except your wife and children. ” This is the message of Lee Kun-hee, former chairman of Samsung Electronics, who circulates like a bible of a company that needs innovation and leadership. I think this message is the most necessary moment for Samsung Electronics more than ever. It is said to be experiencing the biggest crisis since its foundation. Let's talk with Park Joo-geun, CEO of Leaders Index, who connects the stories of companies and leaders. Welcome, CEO.
◇ Park Joo-geun, Leader of Leaders Index (hereinafter referred to as Park Joo-geun): Hello.
◆ Cho Tae-hyun: Let's take a brief look at one. The management dispute with Korea Zinc is underway, and the open purchase of Youngpoong and MBK was completed yesterday. As a result, it is evaluated that it has reached a fairly advantageous position by securing a stake, but what do you think, CEO?
◇ Park Joo-geun: The original announcement yesterday was supposed to be made on the 17th, but we opened it yesterday and last night, which is unusual. 5. It seems like we've entered an advantageous phase first of all, saying 34% has secured a stake through a tender offer, but funny enough, didn't the stock just open right now this morning? With the opening, Korea Zinc stock hit 830,000 won.
◆ Cho Tae-hyun: Oh, it's over.
◇ Park Joo-geun: So the market is going to have fun. First of all, the MBK Youngpoong Union seems to have occupied an advantageous position, but in fact, it is advantageous. It's 38% of the current stake. And assuming that Korea Zinc's side has purchased all 20% of its shares, the stake goes up to 46%. Because treasury stocks can't secure voting rights.
◆ Cho Tae-hyun: First of all, I'm sure it's advantageous.
◇ Park Joo-geun: I'm sure, but the question is how many board members will be included in the extraordinary shareholders' meeting next month, and what decision will be made at the general shareholders' meeting in March next year will be the key, and Youngpoong, who owns more than 33% of the stake, will probably continue to fight very slowly on the Korean side.
◆ Cho Tae-hyun: Okay. As you said, I think we need to watch the situation and continue to see the geographical fight. Let's go to Samsung Electronics in earnest. Although I continued to cover Samsung Electronics' crisis, I don't think there is a time when Samsung Electronics was not in a crisis every year. People say it's a crisis every year, but I think the story of a crisis actually came out a little differently. I don't think this is the time, but the third quarter's performance is being evaluated as very disappointing. Why do you think you're seeing it like that when the market is also showing a lot of disappointment?
◇ Park Joo-geun: The sales were good. Compared to the same period last year, it increased by 7%. Of course, last year's performance was very bad, so it's hard to compare it, but instead, operating profit fell 13%. This was the problem, so Samsung Electronics Vice Chairman Jeon Young-hyun issued an apology, saying that he did not meet market expectations.
◆ Cho Tae-hyun: I was surprised.
◇ Park Joo-geun: The problem is that it's HBM. In fact, we haven't made an official announcement that we still passed the Nvidia quality test. If you remember it well, Nvidia CEO Jensen Hwang said about Samsung Electronics in June that he wanted it to end soon, so the media reported that Samsung Electronics was reeling from the heat problem and that it would be resolved soon, but it's October now. It's still not being able to supply it.
◆ Cho Tae-hyun: Looking at the data on the disclosure right now, it's being delayed. and talked about it.
◇ Park Joo-geun: And now, four months later, we're reporting that only the AI chips that Nvidia exports to China are loaded with Samsung HBMs. What kind of chip is this, semiconductor products with poor performance are for export to China. So, this problem is that Samsung Electronics' technical problem, which was called a technology gap, is facing a crisis, and this is even a fundamental problem.
◆ Cho Tae-hyun: HBM is made by stacking DRAMs. Originally, Samsung was ahead of technology, but in this regard, it is completely behind SK Hynix. That's why it's being evaluated as a crisis, but Vice Chairman Jeon Young-hyun issued this apology. Isn't this a very famous person in the semiconductor field?
◇ Park Joo-geun: You've been in charge of memory for a very long time. Looking at Vice Chairman Jeon Young-hyun as an unusual case, Samsung Electronics originally had a DX division and a DS division. DX is called a digital experience, so DX is on this side of smartphones and home appliances that we know.
◆ Cho Tae-hyun: Finished products.
◇ Park Joo-geun: DS is literally a device solution, a parts business. So, semiconductor, foundation, system LSI, and these three divisions are DS business headquarters, and the head of Samsung Electronics' DS division was originally CEO Kyung-hyun. I dropped out in the middle. Unusual.
◆ Cho Tae-hyun: That's right.
◇ Park Chu-geun: It was the first time in the last 10 years. The fact that he took the position is the master of the reversal. He's 64 years old. You're born in 60 years. So I was the head of the DS memory division in 2014. He was the head of the department 10 years ago. That's why we brought the head back 10 years ago. Since this person came in May, he must have seen the organization for about 4 months. And when I announced my third quarter performance, I issued an apology, and if you look closely at the contents of the apology, you can see right away that 'Samsung Electronics is in a total crisis.' There are three key points of the apology. I brought up the term "restoring the fundamental competitiveness of technology." That's what I said to myself that all the technology is falling behind. The second is that I said I would prepare for a more thorough future, so there is no future blueprint. Third, I will innovate the organizational culture and the way I work. He proved himself that there was a significant problem with the organizational culture. If you look at the first one again, what core values Samsung Electronics originally has, competitiveness is technology leadership. It has a structure in which it preemptively puts it on the market with what we call super-gap technology and takes significant preemptive profits first. Semiconductors are typical. In fact, Samsung Electronics has been operating until now with a structure that develops 1.5 cycles faster than others and puts them on the market and takes a lot of profits. So securing technical leadership was Samsung Electronics' biggest competitiveness, but the current problem is that the biggest core competitiveness itself is now faltering when Vice Chairman Jeon Young-hyun comes in. That's why I used the word "restoring the competitiveness of the enemy of technology."
◆ Cho Tae-hyun: When it comes to Samsung in the past, it's not working when OLED is the first to get ahead of semiconductors and make a lot of money.
◇ Park Chu-geun: That's right. The second is more thorough preparation for the future, but if you think about it carefully, Chairman Lee Jae-yong became the head of the company after Chairman Lee Kun-hee collapsed in 2015, and of course, there were judicial risks, and it has been almost three years since he won the chairman's title. And yet it's still silent.
◆ Cho Tae-hyun: I can't see anything.
◇ Park Joo-geun: So I haven't come up with a clear blueprint for the future to shareholders or investors. For example, what would Samsung Electronics do to AI and what would Foundry do? There is a certain uncertainty among investors about it because they are unable to come up with a clear blueprint for talking.
◆ Cho Tae-hyun: So I try to keep doing what I used to be good at, and I don't see anything new.
◇ Park Joo-geun: And behind this, I think we've diagnosed internally that the organizational culture is actually quite a problem.
◆ Cho Tae-hyun: What is the problem with organizational culture?
◇ Park Joo-geun: First of all, Samsung Electronics has to read technological changes, but we talk a lot about semiconductor companies all over the world. Semiconductor companies can be classified into two main categories. We have an IDM company. This is a company that does everything from design to final. There are only two places in the world. This is Intel and Samsung Electronics. Intel is an IDM semiconductor company that is all different based on the technology called CPU, and Samsung Electronics does everything based on the technology called memory semiconductor, but in the past, this IDM company commanded the world. And in that market, how the market was formed was a supplier-oriented market. If you think about it carefully, when we buy a laptop, we look at whether it's Intel CPU 13th or 12th generation. Right? You wait and buy things. And the memory in it was DDR 4 or DDR 5 and I was waiting to buy the latest model. In such a market, Intel and Samsung Electronics completely led the market. Wait. And the rest of the companies were only looking at these two companies. It was just following along. At that point, we don't buy cases in advance when the S24 comes out. That's how the market was formed. However, as the times change, the 4th Industrial Revolution, IoT, and AI that we've heard a lot about since 2017, and this market begins to collapse. The market is not supplier-oriented, but consumer-oriented. Typically, Apple started making its own M1 M2 M3 M4 chips without the CPU using interior design. Every house that goes into Apple is designed by itself, and not only that, but small home companies even start building their own homes. The market has changed to supplier-oriented and consumer-oriented. That's why TSMC, a foundation company, came up.
◆ Cho Tae-hyun: So, I need something like this, not you guys giving me like this, so I ask you to do it yourself and make it at TSMC or something. So Samsung fell behind because of this?
◇ Park Joo-geun: So the market has changed from supplier-oriented to consumer-oriented, but going back to the organizational culture now, Samsung's organizational culture still has a supplier-dominated organizational culture.
◆ Cho Tae-hyun: You didn't get out of there.
◇ Park Joo-geun: Representatively, there was a problem with HBM because it has to be thoroughly designed around consumers. However, since Samsung is still focused on suppliers, there are no heat generation or yield problems. So, I think the former vice chairman has probably faced this problem.
◆ Cho Tae-hyun: Okay. Then how do we solve this? Do I have to change all the people?
◇ Park Joo-geun: First of all, the first is the technical restoration that the former vice chairman talked about. To do that, it's actually a person. After all, it's people. And what makes Samsung Electronics a little bureaucratic is that it's actually a manufacturing industry. In the end, no matter how good the equipment is, but in the end, it moves at the fingertips of people in the field.
◆ Cho Tae-hyun: That's right.
◇ Park Joo-geun: If you look at the announcement made by Samsung Electronics last week, it means that they will send R&D personnel to the site. When we are doing high-tech semiconductor processes now, the focus of the news until last year was EUV.
◆ Cho Tae-hyun: Dutch exposure equipment.
◇ Park Joo-geun: Everyone says that it depends on how high-tech the exposure equipment EUV brings, but of course, the equipment is important. After all, people matter. So, there are constant diagnoses from the outside that whether an organization that relies on equipment and bureaucrats is the cause of Samsung's current technology problems, and I think the former vice president has seen them, and I think he brought it with the restoration of people's organizational culture innovation or technology to restore people's technology.
◆ Cho Tae-hyun: It's a dinosaur that's gotten too huge, so I think we need this innovation. Another frustrating thing is that you told me earlier, but since Chairman Lee Jae-yong took office, I can't see anything like a future vision. The last thing I remember was Samsung's top 10 new tree species business, so I think it happened a long time ago. I don't think I've seen anything since then, is there any alternative to this?
◇ Park Chu-geun: He looks very frustrated himself. In fact, Vice Chairman Jeon Young-hyun's previous position was the future business preparation team. As such, there were many demands from investors and outside for the future business, but Chairman Lee Jae-yong is still silent. The silence was actually too long. Before that, Chairman Lee Kun-hee said, "As we talked about at the beginning, there is a saying in the business world. The 2nd Lie Chairman Lee Kun-hee said that every time there was a press conference, it was a crisis, but it wasn't that crisis. It was always good, but in the case of LG Group, it was ranked first, but it was not ranked first. Chairman Koo said, "There were also these two big jokes at the time, but the biggest problem for Samsung Electronics is that the uncertainty of the future blueprint is large. No one is telling me about it. For example, whether Samsung Electronics will remain as a global device provider or as a B2B company. Or, there is no specific direction on whether we will build a new business through platforming like Google or Apple to match software competitiveness, or what LLM we rebuild or how we do devices on the AI side. That's why the market continues to be in uncertainty, so if you look at the investment report, it's a giant dinosaur, but it's a lost dinosaur.
◆ Cho Tae-hyun: Samsung Electronics, which is lost now, should I say the first issue to use as an opportunity for a reversal? These things always start to cover inside Samsung at the end of the year. Shouldn't we look at this because of the president's greetings?
◇ Park Chu-geun: It's important. I usually do Samsung Electronics personnel appointments next month and November. Samsung Electronics currently has three vice presidents under Chairman Lee Jae-yong. Now, there is Vice Chairman Jeon Young-hyun in DS business headquarters, Vice Chairman Han Jong-hee in DX business headquarters, and another Vice Chairman in the business support TF supporting the business, right? First of all, I am very interested in the market as to whether to change the vice chairman Lee's system. Another problem right now is that Samsung Electronics has this performance, but it is strongly said that no one is responsible for it. And if you look closely, coincidentally, the heads of three groups, Samsung Group, Hyundai Motor Group, and LG Group, have changed from 2018 to recently. But there's a difference. Since the end of 2018, when Chairman Chung Eui-sun takes office, Hyundai Motor Group has changed all the so-called vice chairmen of Chairman Chung Mong-koo's Gasin Group. After the so-called change, all the changes were made to a new face, and external figures were introduced, and in the case of Chairman Koo Kwang-mo, all the vice-chairman groups of the chairman have changed since he became the chairman in 2018. Finally, as Vice Chairman Kwon went out, LG Ensol's and everything changed and established its own system, and only Samsung Group is still in place, the so-called "U.S. Chamber" in the old days. So there was no personnel reform at all. What is noteworthy about this personnel appointment is that some media are now talking about returning to the "U.S. Chamber", and the first point of view is whether there will be personnel reform for the old organization called the "U.S. Chamber", and the second point of view is how semiconductor research institutes and heads will change, and the third is AI.
◇ Park Joo-geun: If I look closely at Samsung Electronics' personnel, there are no two years of world-famous scholars with AI talents. Last year, President Sebastian Sung from Harvard already disappeared in the first quarter. So, I think we should answer the question of why these disappointed global talents cannot survive this time.
◆ Cho Tae-hyun: In the end, I think it will inevitably end up as an organizational culture, but we need to keep watching the crisis of Samsung Electronics and what the solution will be. So far, we've talked about Samsung Electronics with Park Joo-geun, CEO of Leaders Index. Thank you for talking today.
◇ Park Chu-geun: Yes. Thank you.
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