Despite Its Note 7 And Bribery Scandals, Samsung Is Somehow Having An Awesome 2017
South Korean models show Samsung Galaxy Note8 devices during a showcase to mark the domestic launch of Samsung Electronics' latest flagship smartphone in Seoul on September 12, 2017. (JUNG YEON-JE/AFP/Getty Images)
2017 should not have been Samsung Electronics’ year.
For starters, Samsung Group’s de facto leader was sentenced in August to five years in prison. The most damning find against Lee Jae-yong, who has unofficially led Samsung Electronics’ holding group since 2014, was an alleged bribery donation of 43.3 billion won (about $38 million) to win merger approval from then-President Park Geun-hye. Lee made history as the first conglomerate leader in Korea to be imprisoned for bribery (several have been locked away for embezzlement).
And then there was the Samsung Galaxy Note 7 and its unfortunate tendency to burst into flames. That lead to an operating loss of $5 billion, CNBC reported on Jan. 22, and there was global criticism of Samsung’s poor communication with customers on the product’s safety. Experts felt that Samsung’s Note 8 wouldn’t win many over, particularly in the foreign market.
But consumers seem to have forgiven Samsung Electronics. Analysts are predicting record-crushing sales for the Galaxy Note 8, the successor to the Galaxy Note 7. Lee Soon-hak of Hanwha Investment and Securities told The Investor last month that he expects sales of up to 12 million Note 8 units. That beats the previous record — 8.5 million Note 5 units.
That’s a total about-face from previous predictions that the Note 8 would be a flop. Americans pre-ordered the phablet at record numbers. South Koreans bought 270,000 units in its first weekend in stores, The Investor reported on Sept. 18, compared to 160,000 units of the preceding model. (The firm has not yet released worldwide sales data.)
It won’t be known for a few weeks if the $930 Note 8 is truly safe. As CNET editor Jessica Dolcourt wrote, initial Note 7 reviews were cheery until repeated reports of combusting batteries. To inspire confidence in those like Dolcourt, though, Samsung now has rigorous testing standards for its new battery pack and secured endorsement from Underwriters Laboratories, a respected safety standards organization. It also assuaged consumer worries with the safe Samsung Galaxy S8, released in April to positive reviews.
A healthy balance sheet, despite all odds
This success is already reflected on Samsung Electronics’ stock ticker. Its stock hit record highs in the past month, up 65% from last September.
And the firm reported record-high second-quarter revenue in July, CNBC reported, jumping 73% from the previous year. That success was due mostly to a huge increase in semiconductor sales, which leapt from 2.6 trillion won ($1.8 billion) to 8 trillion won ($7.0 billion).
Moore’s Law and a family feud threaten Samsung
But analysts like Park Sang-in, a professor at Seoul National University’s Graduate School of Public Administration, aren’t cheery about Samsung Electronics’ outlook.
Moore’s Law dictated in 1965 that the number of transistors on a semiconductors should double every two years, but that dependable progress will slow. Semiconductors make up the majority of Samsung Electronics sales, and Park said Samsung will no longer be able to create superlative semiconductors in the coming years.
“Many manufacturers will catch up quickly” to Samsung’s innovative chips, Park said in an interview with Forbes. “It’s a huge risk to Samsung Group in the future and the Korean economy as well.”
To complicate issues, Samsung Group’s leadership remains uncertain. Samsung Group Chairman Lee Kun-hee, the son of Samsung’s founder, has been hospitalized since 2014. His son Lee Jae-young has since been the de facto leader, but now he is serving a five-year prison sentence. The ailing chairman also has twodaughters aspiring for the top title in this family business — both experienced executives within Samsung, and neither embroiled in a corruption scandal. Investors are particularly hopeful that Lee Boo-jin, Kun-hee’s eldest daughter, will take hold of the family business.
A higher court decision is expected next spring that will either allow Lee Jae-young to have a shorter prison term or enforce the five-year punishment. Even if he is forced to serve the full term, it’s typical for Korean business leaders to return to their posts after a prison term. Some, like SK Group’s Choi Tae-won, even maintain their business behind bars.
The possible result, Park said, is a family feud that could split apart South Korea’s biggest company. Samsung’s assets equal 42% of this country’s GDP, according to Park.
“In a certain sense that will be the first time, Korea will have some serious owner risk” for one of its top conglomerates, Park said. That uncertainty is all the more dire considering the upcoming technological conundrum threatening semiconductor innovation, the biggest seller for Samsung Group’s largest firm.
But until the higher court decision in six or so months, and the looming end to Moore’s Law, Park said it should be business as usual for Samsung. And luckily, business happens to be quite good.
">South Korean models show Samsung Galaxy Note8 devices during a showcase to mark the domestic launch of Samsung Electronics' latest flagship smartphone in Seoul on September 12, 2017. (JUNG YEON-JE/AFP/Getty Images)
2017 should not have been Samsung Electronics’ year.
For starters, Samsung Group’s de facto leader was sentenced in August to five years in prison. The most damning find against Lee Jae-yong, who has unofficially led Samsung Electronics’ holding group since 2014, was an alleged bribery donation of 43.3 billion won (about $38 million) to win merger approval from then-President Park Geun-hye. Lee made history as the first conglomerate leader in Korea to be imprisoned for bribery (several have been locked away for embezzlement).
And then there was the Samsung Galaxy Note 7 and its unfortunate tendency to burst into flames. That lead to an operating loss of $5 billion, CNBC reported on Jan. 22, and there was global criticism of Samsung’s poor communication with customers on the product’s safety. Experts felt that Samsung’s Note 8 wouldn’t win many over, particularly in the foreign market.
But consumers seem to have forgiven Samsung Electronics. Analysts are predicting record-crushing sales for the Galaxy Note 8, the successor to the Galaxy Note 7. Lee Soon-hak of Hanwha Investment and Securities told The Investor last month that he expects sales of up to 12 million Note 8 units. That beats the previous record — 8.5 million Note 5 units.
That’s a total about-face from previous predictions that the Note 8 would be a flop. Americans pre-ordered the phablet at record numbers. South Koreans bought 270,000 units in its first weekend in stores, The Investor reported on Sept. 18, compared to 160,000 units of the preceding model. (The firm has not yet released worldwide sales data.)
It won’t be known for a few weeks if the $930 Note 8 is truly safe. As CNET editor Jessica Dolcourt wrote, initial Note 7 reviews were cheery until repeated reports of combusting batteries. To inspire confidence in those like Dolcourt, though, Samsung now has rigorous testing standards for its new battery pack and secured endorsement from Underwriters Laboratories, a respected safety standards organization. It also assuaged consumer worries with the safe Samsung Galaxy S8, released in April to positive reviews.
A healthy balance sheet, despite all odds
This success is already reflected on Samsung Electronics’ stock ticker. Its stock hit record highs in the past month, up 65% from last September.
And the firm reported record-high second-quarter revenue in July, CNBC reported, jumping 73% from the previous year. That success was due mostly to a huge increase in semiconductor sales, which leapt from 2.6 trillion won ($1.8 billion) to 8 trillion won ($7.0 billion).
Moore’s Law and a family feud threaten Samsung
But analysts like Park Sang-in, a professor at Seoul National University’s Graduate School of Public Administration, aren’t cheery about Samsung Electronics’ outlook.
Moore’s Law dictated in 1965 that the number of transistors on a semiconductors should double every two years, but that dependable progress will slow. Semiconductors make up the majority of Samsung Electronics sales, and Park said Samsung will no longer be able to create superlative semiconductors in the coming years.
“Many manufacturers will catch up quickly” to Samsung’s innovative chips, Park said in an interview with Forbes. “It’s a huge risk to Samsung Group in the future and the Korean economy as well.”
To complicate issues, Samsung Group’s leadership remains uncertain. Samsung Group Chairman Lee Kun-hee, the son of Samsung’s founder, has been hospitalized since 2014. His son Lee Jae-young has since been the de facto leader, but now he is serving a five-year prison sentence. The ailing chairman also has twodaughters aspiring for the top title in this family business — both experienced executives within Samsung, and neither embroiled in a corruption scandal. Investors are particularly hopeful that Lee Boo-jin, Kun-hee’s eldest daughter, will take hold of the family business.
A higher court decision is expected next spring that will either allow Lee Jae-young to have a shorter prison term or enforce the five-year punishment. Even if he is forced to serve the full term, it’s typical for Korean business leaders to return to their posts after a prison term. Some, like SK Group’s Choi Tae-won, even maintain their business behind bars.
The possible result, Park said, is a family feud that could split apart South Korea’s biggest company. Samsung’s assets equal 42% of this country’s GDP, according to Park.
“In a certain sense that will be the first time, Korea will have some serious owner risk” for one of its top conglomerates, Park said. That uncertainty is all the more dire considering the upcoming technological conundrum threatening semiconductor innovation, the biggest seller for Samsung Group’s largest firm.
But until the higher court decision in six or so months, and the looming end to Moore’s Law, Park said it should be business as usual for Samsung. And luckily, business happens to be quite good.
Post a Comment