Samsung heir seized leadership moment but will he succeed?

[THE INVESTOR] Samsung Group’s heir apparent  Lee Jae-yong chose to face up to the challenge by joining the board of Samsung Electronics at a time of crisis.

Navigating the world’s No. 1 smartphone maker out of its current troubles, stemming from explosive batteries used in its latest phone rollout, will be his first real test as the colossal conglomerate’s new leader, analysts said. 

“Samsung has been shrouded in uncertainty stemming from the leadership vacuum,” said Kim Sang-jo, professor at Hansung University who leads a civic group Solidarity for Economic Reform.

“It needed to show that it has a leader who can bring the current situation under control.”

Samsung Electronics has suffered a major setback in its reputation as well as the bottom line, when its ambitious new rollout of the Galaxy Note 7 was found to have faulty batteries that can catch fire. The company is currently in the process of recalling the entire 2.5 million units it has already shipped, which analysts say could cost up to 2 trillion won.

In a surprise move Monday, Lee Jae-yong, Samsung Electronics vice chairman and the only son of the ill-stricken Chairman Lee Kun-hee, decided to enroll himself as the firm’s registered director.

The junior Lee, 48, has been the acting chief of Samsung since May 2014 when his father suffered a nearly fatal heart attack. Chairman Lee remains bedridden to this day. 

“The vice chairman becoming a registered director doesn’t necessarily signal he will soon be promoted to the chairmanship,” a Samsung Group official was quoted as saying by Yonhap.

Nevertheless, local analysts and media took the junior Lee’s joining of the Samsung Electronics boardroom, although pending shareholders’ approval next month, as the most significant event so far in Samsung Group’s hereditary succession. 

“It was a public demonstration of Vice Chairman Lee’s strong will to take full charge,” said Lee Jeong, analyst from Eugene Investment & Securities.

“With him at the helm, Samsung Electronics may try bold moves to put an end to market concerns (regarding the battery crisis) once and for all.”

Investors reacted positively to the news. Shares in Samsung Electronics, which in the previous session tumbled nearly 7 percent, rose more than 4.5 percent at 3 p.m. Wednesday. Expectations on the new leadership also boosted other Samsung Group companies such as Samsung C&T and Samsung SDI.  

By Lee Sun-young (milaya@heraldcorp.com)