Samsung's open, hidden strategy under unproven head

Lee Jae-yong, Samsung Electronics vice chairman, arrives for the first session of annual the Allen and Co conference at the Sun Valley, Idaho Resort in this July 10, 2013 file photo. [Photo/Agencies]

SEOUL - Samsung Group, South Korea's largest family-run conglomerate, has entered a new era under the third- generation leadership. Lee Jae-yong, the only son of Samsung Electronics chairman Lee Kun-hee, has been effectively running the "Ferry Samsung" since his father was hospitalized in May 2014 for a heart attack.

The ferry under the helm of a new captain has set sail with a strong headwind. Sales of Samsung's flagship Galaxy smartphones, which Samsung Electronics depends on more than half of its revenue, declined sharply. The sense of crisis emerged as the tech giant appeared sandwiched between Apple and fast-growing Chinese rivals.

"Chinese manufacturers will certainly surpass Samsung in almost all tech products, except for some areas such as semiconductors. Finding a breakthrough will be the first test for Lee Jae-yong's management ability," said a senior executive of a foreign bank's Seoul branch, who declined to be identified, in a recent interview.

When talking about the junior Lee's management ability, the most-used words are "unproven" and "untested." The 47-year-old has shown few accomplishments since he joined Samsung in 2001. Not a few people still remember the failure of e-Samsung, the Internet venture that was launched by the younger Lee in 2000 amid the dot- come bubble and went under a year later with heavy losses.

"Vice chairman Lee Jae-yong's business, run before he came to Samsung, went bankrupt, and the assessment over him is being divided internally," an employee at the section-chief position of Samsung Electronics told Xinhua.

"I heard that he hasn't fully controlled the management. As seen in stock price movement, expectations for him appeared less than those for his sister Lee Boo-jin, president of Hotel Shilla," the employee said.

Open strategy, it-health convergence

To overcome the sense of crisis and concerns over his management ability, the Samsung Electronics vice chairman selected a convergence of its powerful IT, mobile technology and health care as an open strategy for another leap forward.

Lee said during his six-day visit to China for the 2015 Boao Forum for Asia (BFA) conference that the convergence between IT, health care, bio-tech and tourism, which Samsung will push for, will serve as a new growth engine.