[Column] Samsung’s ‘lost decade’ and Lee Jae-yong’s mismatched chopsticks

Posted on : 2024-05-12 10:54 KST Modified on : 2024-05-12 10:54 KST
If Lee Kun-hee’s chopsticks represented an allegory of the future and resolve, what was the meaning of his son’s mismatched chopsticks?
President Yoon Suk-yeol of South Korea (right) eats tteokbokki with business bigwigs, including Lee Jae-yong of Samsung Electronics, at a market in Busan on Dec. 6, 2023.
President Yoon Suk-yeol of South Korea (right) eats tteokbokki with business bigwigs, including Lee Jae-yong of Samsung Electronics, at a market in Busan on Dec. 6, 2023.

By Lee Bong-hyun, editorial writer and director of the Hankyoreh Economic Research Institute

It was quite a curious image, and after spending some time looking at it, I noticed a subtle difference.

The photograph in question, which was taken in early December 2023, showed President Yoon Suk-yeol eating tteokbokki at Busan’s Kkangtong Market with corporation chairpersons flanking him like a folding screen. The only difference was in Samsung Electronics Chairperson Lee Jae-yong’s chopsticks.

While Yoon and the other chairs were holding matching red chopsticks, Lee had a mismatched set of red and black ones. Judging from the mixture of different types of chopsticks in the canister to one side of the narrow table, it looked as though a distracted server at the fish cake restaurant had simply handed him whichever ones she had grabbed.

From there, my thoughts drifted to the connection with chopsticks and Samsung Electronics. In fact, chopsticks are a part of the story about the emergence of South Korea’s world-class semiconductor company.

The late former Samsung Chairperson Lee Kun-hee sowed the seeds for his company’s later transformation into a semiconductor superpower when he acquired the then-foundering Korea Semiconductor in 1974.

Many tried to dissuade him, calling it overly ambitious for the company to attempt to make semiconductors when it couldn’t yet make a proper television. But Lee insisted, vowing to buy a stake with his own money if he had to.

“We’re a culture that uses chopsticks, so we’re skilled with our hands, and we value cleanliness, as you see with the way we take off our shoes indoors,” he said. “That’s exactly the right kind of culture to produce semiconductors.”

Such was the “chopsticks theory of culture” that Lee proclaimed when he convinced people that Koreans’ talents and characteristics were a perfect fit for producing semiconductors — a key element in information technology at a time when history was pointing to a transition from an industrial society to an information society. Indeed, the futurologist Alvin Toffler wrote in one book that nations that used chopsticks would dominate the information era of the 21st century.

Perhaps that’s an explanation for how advanced semiconductor manufacturing came over the past half-century or so to be dominated by East Asian, chopstick-using nations like South Korea, Taiwan and Japan.

If Lee Kun-hee’s chopsticks represented an allegory of the future and resolve, what was the meaning of his son Lee Jae-yong’s mismatched chopsticks?

For some people, the words “out of sync” might come to mind. That’s the sense many get today from Samsung Electronics, which has become less keen at reading industry trends and preparing for them ahead of time.

At the moment, it’s locked in a battle with SK Hynix, having given up the lead after overlooking the potential of high-bandwidth memory — a focus of skyrocketing demand in the AI era.

Samsung has devoted itself to achieving extreme precision in its process of etching circuits onto wafers. But it missed the growing importance of post-processing areas such as packaging and testing, and it ended up falling even further behind top-ranked TSMC in the foundry business.

Its performance in new areas such as system semiconductors has been slack, and now it finds itself challenged in the memory and foundry areas by American competitors Micron and Intel, which have benefited from extensive state support.

The financial world observers who have been declaring Samsung Electronics to be in crisis describe the last 10 years as a “lost decade.” This coincides with the time Lee Jae-yong has held the group’s management reins, having taken over from his father following the latter’s health issues.

A former key administration policy official who asked not to be named suggested that the same Samsung business structure that achieved such successes in the past no longer seemed to be functioning.

“People at Samsung have prided themselves on the so-called ‘golden triangle’ — the combination of the chairperson’s leadership, the strategy office’s planning capabilities, and the execution capabilities of the engineer CEO — as the driving force responsible for creating a big gap,” this former official explained.

“But now two of those corners have been weakened: the chairperson’s leadership and the strategy and planning functions,” they added.

“In particular, it seems like even the synergy that’s supposed to come from the control tower operating lawfully and normally has disappeared since the Future Strategy Office was dismantled in the wake of the government influence-peddling scandal,” they said.

In another sense, the mismatched chopsticks could be a metaphor for creativity and innovation. The idea that chopsticks have to be matching colors is a preconceived notion. Those who only follow the same trails cannot blaze new ones.

In the history of companies’ rises and falls, the experience of success has always been a trap for the top-ranked business. Those that act complacently when change is needed end up being toppled by challengers with new paradigms. Examples of this include Xerox and Kodak, which failed at their business transition attempts even with a wealth of technologies and patents to provide them with future resources.

Intel is another company that contented itself with the profitability of computer central processing units (CPUs), only to end up diminished in the mobile era.

The old Samsung Electronics was different. It uncovered new growth drivers through bold investments in the potential of technology. Tenaciously pursuing its vision, it created and occupied markets in the areas of flash memory, LCDs and smartphones.

What Samsung Electronics needs today is the courage to face the unfamiliar, along with the “hunger” that Steve Jobs cited as a driving force for innovation.

Some may question whether what’s good for Samsung Electronics is good for the rest of us. But with the company accounting for over 10% of South Korea’s gross domestic product (GDP), failure would be a disaster for the national economy.

The foreign press is already talking about the “twilight of manufacturing” in South Korea. In an era when semiconductors are treated as special strategic goods and countries are competing to lavish them with subsidies, the difference between having and not having an advanced semiconductor company is a big one.

In these turbulent times, the amount of time the company has left to turn things around may be less than five years. We need to see more hunger and more urgency from Lee Jae-yong and Samsung Electronics.

Please direct questions or comments to [english@hani.co.kr]

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