Samsung chairman's heart attack puts spotlight on succession

JUNGAH LEE, SHARON CHO
Last updated 13:39 13/05/2014
Bloomberg
Samsung chairman Lee Kun Hee with his daughter Lee Boo Jin earlier this year.

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Samsung Electronics chairman Lee Kun Hee, who leads Asia's biggest technology company and helps generate about a quarter of South Korea's economic output, remains in stable condition after emergency surgery following a heart attack.

Lee, 72, is at Samsung Medical Centre in Seoul after being resuscitated following an acute myocardial infarction, spokeswoman Rhee So Eui said. Lee, who was treated for lung cancer in 2000, underwent surgery to boost his oxygen intake after experiencing difficulty breathing on Saturday night.

After taking over the business in 1987, Lee built it into the world's largest maker of smartphones, televisions and memory chips, becoming South Korea's richest man in the process. He appointed his son, Lee Jae Yong, vice-chairman of the electronics unit in 2012 as Samsung Group became the nation's biggest conglomerate with US$326 billion in sales.

"His son's been brought into the company's management for a number of years now," said Warren Lau, an analyst at Kim Eng Securities in Hong Kong. "The question now is what is his vision for the company, whether he can find the next major growth driver."

Adam Yates, a spokesman for Samsung in the US, didn't immediately respond to requests for an update on Lee's condition.

APPLE DEAL

Lee Kun Hee's hospitalisation comes as Samsung Electronics tries to rebound after posting the lowest sales in five quarters at its mobile phone business, which accounts for 76 per cent of operating income. Chinese producers are gaining in emerging markets with cheaper, feature-packed devices, and Apple is boosting iPhone sales through China Mobile to better compete with Samsung's marquee Galaxy S series.

"Some investors seem to be getting hopes up that strategic changes involving the company's dividend policy and share buybacks may take place," said Lee Jin Woo, a Seoul-based senior fund manager at KTB Asset Management.

The shares have surged more than 130-fold since Lee replaced the group's founder, his father Lee Byung Chull, as chairman.

DUSTY PRODUCTS

The patriarch chose his third son in 1971 ahead of two older brothers because they weren't interested in the business, according to The Lee Kun Hee Story, a biography published in 2010. Lee Kun Hee was ranked among the world's 100 most influential people by Time magazine in 2005.

Lee also leads Samsung Group, which has more than 70 affiliated companies, including Samsung Heavy Industries and Samsung C&T. He has an estimated net worth of US$11b, according to the Bloomberg Billionaires Index.

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Sales at Samsung Electronics surged last year, making it the world's largest electronics company by revenue. Lee initiated a company makeover in 1993 when he told employees in Germany he wanted to move up the manufacturing value chain and produce higher-quality products.

That year, Lee began overhauling Samsung Electronics after seeing the company's products gathering dust in the corner of an electronics shop in Los Angeles, according to the biography.

SUCCESSION PLAN

By 2013, Samsung Group affiliates generated 333.9 trillion won in sales, according to data from South Korea's Fair Trade Commission. That is equivalent to about 23 per cent of South Korea's gross domestic product, based on 2013 figures from the Bank of Korea.

"Chairman Lee has made a significant mark not just for Samsung but also for the South Korean economy as a whole by helping it globalise," said Chung Sun Sup, chief executive of corporate researcher Chaebul.com. "There's probably no individual or company that holds such a huge responsibility in a country."

Lee Jae Yong joined Samsung in 1991, serving as chief customer officer and vice-president at the strategic planning division before being promoted to vice-chairman in December 2012. He studied at Seoul National University, Harvard Business School and Japan's Keio University.

His sister, Lee Boo Jin, is president of affiliate Hotel Shilla.

"I wouldn't think chairman Lee would be deeply involved in day-to-day operations," said Steve Myers, an analyst with JI Asia in Tokyo. "Samsung is of a size and complexity, and I would think they have a bureaucracy in place so they can handle unexpected events."

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