Samsung’s jailed heir gives up appeal

After Samsung Electronics Vice Chairman Lee Jae-yong decided not to appeal last week’s court ruling, his absence from the country’s top conglomerate was finalized. With Lee in jail, the conglomerate won’t be able to pull off new sizable investments, market observers said.

According to lawyer Lee In-jae on Monday, the Samsung heir expressed his will to respect the court ruling that sentenced him to two and half years in prison in a retrial of the former president‘s bribery case.

Monday was the deadline for an appeal. It was not known as of press time whether prosecutors had gone forward with an appeal.

If they hadn’t, the court verdict will be finalized and Lee will be free in July 2022, unless he is granted a pardon or commutation. The Samsung Electronics vice chairman has served one year in prison already, in 2017, while the trial was under way.

With a void at the top, Samsung may have difficulty in swiftly executing major investment plans for its semiconductor business.

Samsung is reportedly considering two major investments in Korea and the United States.

In Korea, the chipmaker has been planning to construct a third chip-making plant in Pyeongtaek, Gyeonggi Province, which is estimated to cost over 30 trillion won ($27.2 billion).

Samsung was expected to announce the new Pyeongtaek investment last year, but it had to postpone the announcement due to Lee’s trials.

“Some basic work is currently underway in Pyeongtaek with no concrete schedule to announce ground-breaking,” said a senior official at Samsung. “Any of the new investment plans in Korea and the US haven’t been confirmed yet.”

Multiple reports said the South Korean tech giant is preparing to ramp up its Austin, Texas-based foundry plant by investing more than $10 billion with a schedule to fully operate from 2023. Some others said Samsung could build a whole new chip-making plant, which is estimated to cost $17 billion, either in Texas, Arizona and New York.

These speculations were raised coincidentally with the inauguration of US President Joe Biden as well as Intel’s announcement that it would increase its use of outside chip factories.

However, there are mixed views about the possibility of Samsung moving forward with the aggressive investment plans while having its chief in jail.

When Lee was in jail from Feb. 2017 to Feb. 2018, the first Pyeongtaek plant was completed as planned, and additional investments were announced. But the Pyeongtaek plan was set before Lee’s imprisonment.

“Considering the intensifying competition in the chip market, new investments are desperately needed at the moment, but things would inevitably be delayed due to the leadership vacancy,” said a Samsung official at the semiconductor business.

Some think that investment decisions for the chip business could be professionally made by the top brass led by Vice Chairman Kim Ki-nam in accordance with the industry cycle and market conditions.

Operations of ordinary business affairs are likely to be spearheaded by Samsung’s c-level executives, while Lee is expected to be briefed on selected agendas in jail.

“It would be difficult for Samsung to think about entirely new businesses and growth engines that need Lee‘s determination and decision,” said another Samsung official.

By Song Su-hyun (song@herladcorp.com)