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Abscence Of A Leader Is Hurting Samsung Amid Global Chip Shortage

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The absence of Lee Jae-yong, the Vice Chairman and heir to the Samsung conglomerate, is hurting the company big time. The South Korean behemoth is unable to make major strategic business decisions amid an unprecedented global semiconductor chip shortage, allowing its rivals to edge ahead.

Lee has been in jail since January, serving a two-and-a-half-year sentence in the infamous 2017 bribery case. Since he has refused to seek an appeal of the ruling, he will have to serve the entire sentence in the prison.

In the meantime, the tech industry is facing a global shortage of semiconductors right now. There aren’t many chip manufacturing companies out there and those few, like Samsung, TSMC, and Intel, are struggling to supply to the current demand.

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While the likes of TSMC and Intel have already laid out plans to expand their production capacity, Samsung has been left behind. The Korean company has also proposed a multi-billion investment to tackle this chip shortage. It intends to build a new $17 billion chip manufacturing plant in the US.

However, since Lee’s approval is necessary for such major business decisions, his absence is hurting the company. Samsung executives reportedly get only 10 minutes with Lee in jail. That’s certainly not enough for him to discuss the matters and come to a decision. As such, the company has yet to decide where to locate the new production facility. It’s reportedly considering multiple sites in Arizona, Austin, and New York but has yet to finalize one.

Samsung already has a plant in Austin. So chances are that it will build more facilities in the capital city of Texas. The company has reportedly “asked the local government to grant tax breaks of up to $800 million over a 20-year period”. What comes out of these talks remains to be seen.

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In the meantime, TSMC has announced plans to invest $100 billion over the next three years to increase its production capacity. The Taiwanese firm is building a $12 billion plant in Arizona. Intel is also investing $20 billion to set up two new fabrication plants in the state.

Samsung finds itself in a state of crisis as the global chip shortage hit hard

The ongoing global semiconductor chip shortage has hit the entire tech industry hard, including Samsung. Not only this unprecedented problem has delayed the production of electronic goods and modern vehicles, but it has also delayed 5G rollouts. Of course, this shortage won’t last forever as the demand will eventually die down at some point. But work needs to be done right now so as to prevent a global slowdown of technological progress, or perhaps avoid future shortages.

The problem isn’t of a small scale and has required the White House to jump in. US President Joe Biden is reportedly signing an executive order to conduct a supply chain review. The American government has also invited a meeting with the biggest names in the chip industry to discuss this problem. Samsung, being one of the top players in the industry, is obviously going to the meeting.

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However, the absence of its leader Lee Jae-yong means the company is once again finding it hard to come to a decision, as to whom to send to the high-level meeting. As of last week, the Korean firm had yet to finalize who will represent it. Kim Ki-nam, the head of Samsung’s device systems division, was a name being considered. It’s unclear whether he’s going to the meeting scheduled for later today.

To that end, Samsung’s leadership woes may not end anytime soon as Lee is facing another trial later this month. This case revolves around his involvement in a disputed merger of two Samsung affiliates and alleged accounting fraud. If he’s convicted, it could mount more troubles for the Korean firm.