Samsung CEO Moves to New Role

Published June 07, 2012

| Reuters

Samsung Electronics Co, Asia's technology powerhouse battling Apple (AAPL) for smartphone supremacy, is shifting its CEO to a new role as the family-run parent company prepares to transfer ownership control to a third generation.

Choi Gee-sung, 61, will assume the new role of head of corporate strategy at Samsung Group, which presides over some 81 companies including its flagship, Samsung Electronics.

In a career with Samsung spanning more than three decades, Choi has worked in all of the group's main business divisions, from semiconductors to home appliances, televisions and telecoms, before taking over as chief executive in 2010.

Crucially, he is widely seen as chief mentor to Jay Y. Lee, son of Samsung Electronics' chairman Lee Kun-hee and the group's heir apparent. Jay Y. Lee, 43, stays as chief operating officer.

"Jay Y. Lee is in the final stage of being groomed ... and Choi will help in this process, helping him look into the group as a whole, not just the electronics unit," said Chung Sun-sup, head of chaebul.com, an online information provider on South Korea's industrial conglomerates, which wield enormous political and economic clout.

Choi oversaw Samsung's rise to become the world's top maker of smartphones and televisions, just as rivals - from Sony Corp <6758.T> to Nokia <NOK1V.HE> and BlackBerry maker Research In Motion <RIM.TO> - have struggled to innovate.

The South Korean group named Kwon Oh-hyun as its new CEO. Currently head of Samsung's components business, which oversees chips and display, Kwon cemented Samsung's position in memory chips, where it has almost 50 percent global market share, and expanded into non-memory, or logic chips, which now account for 40 percent of Samsung's overall semiconductor revenue.

Under Kwon, Samsung became the sole supplier of the mobile processors that power Apple's iPhone and iPad - rival products to Samsung's own Galaxy and Note. The 59-year-old former engineer, who studied electrical engineering at Seoul National University and Stanford, has also led a restructuring of Samsung's LCD flat-screen business.

PUBLIC FEUD

Samsung said there would be no operational impact from the reshuffle, with Kwon still overseeing the components business.

"There'll be no major changes in overall strategy as Kwon will continue to oversee the components business, while telecoms and consumer electronics are separately run by other executives," said James Song, analyst at KDB Daewoo Securities.

The announcement comes on the anniversary, 19 years ago, of Lee Kun-hee's 'new management declaration', when he told Samsung executives at a Frankfurt hotel they should change everything except their wives and children to improve the firm's then sub-standard product quality.

Today, Lee Kun-hee, 70, is embroiled in a public feud with members of his family that could speed up the transfer of control to his son. He is defending three lawsuits from relatives who claim around $1 billion of Samsung assets they say Lee inherited and hid in nominee accounts.

Samsung, which said earlier this month that sales of its range of Galaxy S smartphones had topped 50 million, has moved quickly to overtake Apple in the fast-growth smartphone market and this year ended Nokia's 14-year rein as global handset leader.

LOGIC CHIP INVESTMENT

Samsung said earlier on Thursday it will spend $1.9 billion on a new logic chip line to make processors for mobile devices amid explosive demand for smartphones and tablets.

It said the new line will use 300 mm wafers and cutting-edge 20 nanometer and 14 nanometer processing technology, moving a step closer to its bigger rival Intel <INTC.O>, as key competitors in its bread-and-butter memory chips business struggle to remain profitable.

Once-dominant Japanese firms have been battered by rising costs and Samsung's investment clout.

The Japanese have the technology, but the likes of Elpida Memory, a maker of DRAM memory chips for computers, and Renesas Electronics Corp <6723.T>, the world's leading maker of microcontroller chips for automobiles, just don't have the money to plough into the constant plant and technology upgrades.

"With the new investment, Samsung is trying to retain existing customer Apple and broaden its customer base as Microsoft releases its Windows 8 operating system later this year, which will run on tablets as well as PCs," said Lee Sun-tae, an analyst at NH Investment & Securities.

Samsung, which converted two memory chip lines into non-memory production earlier this year, is widely expected to switch another memory chip line in Austin, Texas, to logic chips to churn out more processors used in Apple products.

Demand for system chips used in smartphones and tablets is set to more than double to $59 billion in 2016 from $23 billion last year, according to research firm Gartner.

Ahead of the announcements, shares in Asia's biggest technology firm, valued at $163 billion, closed up 5.2 percent in a broad market rally that sent the benchmark KOSPI index <.KS11> up 2.6 percent.

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