From record chip profit to labor issues, Lee Jae-yong faces mixed fortunes as 4th year at Samsung helm wraps

Samsung Electronics Executive Chairman Lee Jae-yong will mark four years at the helm of the Korean behemoth on Tuesday with a mixed scorecard. The AI boom has lifted the company's chip earnings, but weak results in finished products, losses at its contract chipmaking business and labor-management friction remain unresolved.

Lee is expected to let the anniversary pass without a separate commemorative event, business sources said Monday.

"Since our founding, the values we have prized most are talent and technology," the chairman said in a message to employees upon taking the post in October 2022.

Samsung Electronics' annual operating profit plunged from 43.4 trillion won ($32.8 billion) in 2022 to 6.6 trillion won in 2023, when a chip downturn hit. It rebounded to 43.6 trillion won last year.

Earnings surged this year on expanding demand for AI chips and rising memory prices. The company posted operating profit of 57.2 trillion won in the first quarter and 89.5 trillion won in the second.

Third quarter operating profit reached a preliminary 107.4 trillion won, bringing in more than double the company's operating profit for all of 2022. Samsung will release final third quarter results, including a breakdown by business division, Thursday.

Samsung has also picked up the pace of mergers and acquisitions in new growth areas. It acquired FläktGroup, a German heating, ventilation and air conditioning (HVAC) company; the advanced driver-assistance systems business of German auto parts supplier ZF Friedrichshafen; and the audio business of U.S. medical technology company Masimo. Samsung made robot maker Rainbow Robotics a subsidiary as well.

The acquisitions could help Samsung diversify its semiconductor-heavy profit base by expanding into automotive electronics, HVAC and robotics.

Rising memory prices have swelled profit at the Device Solutions division, which makes and sells chips. But the same prices have raised costs for the Device eXpereince (DX) division, which needs chips for smartphones, TVs and home appliances.

One division's boom is squeezing another's profitability inside the same company. Even in the chip business, the foundry unit, which manufactures chips designed by other companies, has yet to escape losses, unlike the memory unit. Heavy investment in the company's plant in Taylor, Texas, adds to the burden.

Labor relations are another wild card for Lee's fifth year in charge. Soaring chip earnings have fueled demands for bigger performance bonuses, and conflict has flared over pay gaps between business divisions. Striking a balance between employee compensation and investment in the future is seen as a key challenge.

Samsung's year-end reshuffle of president-level executives, which usually takes place in late November, is now in focus. Key questions are how the strong chip business results will be reflected in personnel decisions and whether the relatively sluggish DX division will see a shake-up. Also drawing attention are possible role changes for the units overseeing new businesses such as automotive electronics, HVAC and robotics, as well as whether Samsung will promote a new generation of executives.

BY PARK YOUNG-WOO [[email protected]]