Samsung Group has undergone various changes since Chairman Lee Kun-hee left management two years ago. He has been bedridden since he succumbed to acute myocardial infarction. His son Jay Y, vice chairman of Samsung Electronics Co., has led the group on behalf of his sick father. Under his pragmatic leadership, the group reorganized itself and explored new businesses at the same time.

The vice chairman adopted a selection and concentration strategy to reorganize the group around three pillars of electronics, finance and biotechnology over the past two years. In the course of the reorganization, Samsung sold off money-making chemical and defense units. The market predicts that Samsung will sell more around construction, advertisement and food service business.

Over the past two year, seven Samsung-branded companies disappeared: Six through divestiture and the remaining one through merger. The number of Samsung affiliates that once surpassed 30 was reduced to 23 except non-for-profit units like foundations.

The group sold four chemical and defense units - Samsung General Chemicals Co., Samsung Total Co., Samsung Techwin Co. and Samsung Thales Co. - to another large conglomerate Hanwha Group in November 2014. The vice chairman officially succeeded to management of the family-controlled company last May. He took over the position of president of Samsung Life Public Welfare Foundation and Samsung Foundation of Culture from his father.

The two foundations are important in the group’s governance structure as Samsung Life Public Welfare Foundation owns a 2.18 percent stake in Samsung Life Insurance Co. while Samsung Foundation of Culture holds a 4.7 percent stake in Samsung Life Insurance and a 3.1 percent stake in Samsung Fire & Marine Insurance Co.

Right after his management succession, he pushed ahead with the merger between Cheil Industries Inc., formerly Samsung Everland Co., and Samsung C&T Corp. In the process of the merger, Samsung had a hard time as U.S. hedge fund Elliott Associates filed a lawsuit against Samsung C&T but the merger was successfully completed. As a result, the vice chairman became the largest shareholder of Samsung C&T with a 16.4 percent stake while Samsung C&T became the second largest shareholder of Samsung Electronics and Samsung Life Insurance with a 4.1 percent stake and 19.3 percent stake, respectively.

The transformation can be epitomized as selection and concentration. Under the strategy, he boldly cut off even profitable businesses if they cannot become globally top ranked in the long term.

Samsung has made various investments into new businesses. The biggest change was the establishment of an automotive electronics division of Samsung Electronics last year. It returned to the automotive business once again after its disgraceful withdrawal from the car industry in 2000. Market observers say that the group has established a large foothold for a business-to-business operation with potential growth.

It is also significant for Samsung Electronics to invest 15.6 trillion won ($13.7 billion) by 2018 to construct a new semiconductor line in Pyeongtaek, Gyeonggi Province and to break ground for its third biologics plant in Songdo, Incheon in December last year. In particular, many take a positive view on the group’s two-track business of biosimilar development by Samsung Bioepis Co. and contract production by Samsung Biologics Co., which is a reminiscent of the initial stage of investment in its semiconductor business in the past.

By Lee Seung-hoon, Lee Gi-chang

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