Samsung has been through a lot in the last 12 months; from the Galaxy Note 7 debacle that saw the company lose over $5 billion by issuing two unprecedented recalls of its combustible phablet to the major political scandal in its home country that resulted in the impeachment of President Park Geun-hye and the arrest of Samsung Group’s Vice Chairman Jay Y. Lee, the company has certainly seen more tranquil times. And yet, the Seoul-based chaebol is still posting record-high profits and its market cap continues to surge amidst all those troubles that prompted some industry watchers to hurriedly proclaim that the second half of 2016 was the beginning of the end for Samsung. As things stand right now, Samsung is still seemingly unphased by everything it’s been through since last summer and has a good chance of maintaining its strong performance in the future.
The firm’s memory chip division is presently dominating the industry and is largely responsible for the fact that the Galaxy Note 7 ordeal didn’t leave a noticeable financial dent on Samsung’s books. While some analysts are pointing out that the NAND market and related segments are essentially a bubble that will burst in the coming years, thus implying that Samsung’s recent growth isn’t sustainable, the tech giant is confident in its prospects and has just opened its latest fab unit in Pyeongtaek that cost approximately $27 billion and was completed in just a few years’ time, which is an impressive time frame even for a company the size of Samsung. At the same time, Samsung Electronics made amends for the Galaxy Note 7 debacle with the Galaxy S8 lineup that’s reportedly selling extremely well and is almost universally praised by both critics and consumers alike.
The unit that represents over two thirds of Samsung Group’s market cap is expected to finish the year in an even stronger manner by releasing the highly anticipated Galaxy Note 8 which is scheduled to be officially unveiled on August 23. Despite last year’s troubles that would have prompted most original equipment manufacturers (OEM) to abandon the brand, Samsung doubled down on the Galaxy Note series and many market watchers believe that consumers will reward that bold approach. With its chipmaking and consumer electronics divisions still performing admirably, Samsung is now on course to take the title of the most profitable company on the planet from Apple after recently surpassing Intel as the world’s largest semiconductor manufacturer.
The global perception of Samsung also doesn’t seem to have radically changed following the tech giant’s recent scandals, of which there were many. Apart from the aforementioned issues, the company is currently also being investigated by Korean authorities over alleged transgressions of its pharmaceutical unit that’s accused of employing illegal lobbying practices in an effort to have its shares listed on the national stock exchange. A number of its former employees are also suing the company for damages after sustaining various severe illnesses including brain tumors that they claim were caused by exposure to toxic materials within the firm’s facilities. The Seoul-based conglomerate previously established a $90 million compensation fund for those workers, but many of them refused the proposition, opting to continue their legal battle with the company.
While its global brand is still going strong, all of the aforementioned issues have impacted Samsung’s image in South Korea and polarized the Far Eastern nation, a portion of which still associates the chaebol with the Korean national identity, thus continuing to nurture the sentiment that was originally formed in the late 20th century and can be summarized in a single sentence often repeated by the company’s advocates – “what’s good for Samsung is good for South Korea.” The current Korean administration led by recently elected President Moon Jae-in previously signaled that Samsung will be under heavy state scrutiny going forward, spelling yet another potential line of trouble for the conglomerate.
While things are far from ideal for Samsung on its home turf, its global operations seem much more stable, albeit the outcome of Lee’s trial may change that; Samsung’s mobile chief DJ Koh recently revealed that following the closure of the tech giant’s central strategy office, its numerous divisions aren’t engaging in collaborative strategic planning. Thus operating in a relatively autonomous manner for the first time in Samsung Group’s history. That state of affairs is unlikely to be the most efficient business strategy for the chaebol in the long term, and if Lee is given a lengthy prison sentence later this summer, Samsung’s prospects may be in a significantly bigger danger than they were in the last 12 months. While the firm has repeatedly proven that it can endure even the largest of scandals, it never did so without a strong leader, and if it ends up losing Lee, it will need to identify his replacement much sooner than it was hoping for in order to continue thriving in the global market.