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Hong Ra-hee, the wife of Samsung Group chairman Lee Kun-hee and the director of the Leeum Samsung Museum of Art, will appear for questioning at the office of special counsel Cho Joon-woong on Wednesday. Earlier on Tuesday, Samsung vice chairman Lee Hak-soo was again summoned for questioning by the special counsel. Some people have speculated that Lee Kun-hee himself may be summoned for questioning soon.
As the special counsel probe grinds on, Samsung Group has neither set its management goals nor made its investment plan for this year, and its annual personnel reshuffle is long overdue. At the same time, Samsung Electronics, the conglomerate's key subsidiary, is ironically concerned about its robust performance. Samsung executives say the company performed well in short-term figures, but it seems to be falling into a deep-rooted sickness. They don't know whether to laugh or weep.
Samsung Electronics is scheduled to announce its first quarter results on April 11. Company executives said that although the first quarter is normally a low-demand season, performance was better than expected. That may actually be an understatement: Samsung Electronics executive director Lee In-yong has said the company might post a record net profit this year.
In 2004, Samsung Electronics became one of the world's 10 most profitable companies by earning net profit of W10.79 trillion (US$1=W984). Lee In-yong is suggesting that the company may break the 2004 record this year. Samsung Electronics¡¯ remarkable performance is due primarily to the rise in the won-dollar exchange rate. According to the company, if the won-dollar exchange rate rises by about W100, the company's annual profit increases by about W3 trillion.
Samsung Electronics had worked out a business plan for this year on the assumption that the won-dollar exchange rate would hover around W920 per dollar this year. But with the exchange rate recently reaching W1,000 per dollar, the company has been earning unexpectedly large profits.
Samsung Electronics' strong mobile phone business found itself in luck's path recently. Heavily in debt, Motorola, the world's third largest cell phone manufacturer, announced on March 26 a plan to spin off its mobile phone operations into a separate company. Meanwhile, Cho Sung-eun, an analyst at Mirae Asset Securities, said, "Samsung Electronics' share of the world's mobile phone market in the first quarter reached 16.5 percent, up 2.4 percent from the fourth quarter of 2007." Choi Gee-sung, president of Samsung Electronics' Telecommunication Network Business, has even declared a goal of overtaking Nokia, the world's largest mobile phone maker, in part by sharply increasing production at the company's plants in China, India and Brazil.
Samsung Electronics' sales of LCDs and digital TVs has also been brisk thanks to the upcoming Beijing Olympics. The price of semiconductor memory chips, the company's key export item, has stopped falling. Elpida, a Japanese chipmaker, and Hynix both recently decided to raise the contract price for their memory chips. Samsung Electronics vice president Joo Woo-sik on Tuesday said his company is considering doing the same, to a small extent.
But executives and employees of Samsung Group, including Samsung Electronics, are still worried. Some of them even said that the group's good performance, based on the rise in the won-dollar exchange rate, is simply statistics and is not really solid performance. Others pointed out that the group hasn't made any new investments while under the special counsel probe, which is another reason why it appears as if the group is performing well.
Samsung is also dealing with other worrying factors: the U.S., its major export market, seems to be heading for recession, and Sony has decided to suspend its cooperation with Samsung Electronics in LCD production. "It looks as if our company is performing well right now," said an executive of Samsung's strategic planning office. "But in a year or two we'll eventually feel the consequences of the company's management vacuum."
Business circles are viewing Samsung's crisis seriously, worried that if the special counsel probe is protracted, not only Samsung but the national economy as a whole may suffer. In a press conference on Tuesday, five major business organizations -- the Korea Chamber of Commerce and Industry, the Federation of Korean Industries, the Korea International Trade Association, the Korea Federation of Small and Medium Business, and the Korean Federation of Employers -- issued a joint statement calling for an early end to the probe.
(englishnews@chosun.com )
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