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Samsung shakes up staff after heir Lee Jae-yong’s arrest

Personnel moves come amid sliding smartphone sales in China

6 HOURS AGO by: Bryan Harris and Song Jung-a in Seoul
Samsung on Thursday announced an executive reshuffle, appointing a new China chief and mobile marketing head, as the technology group attempts to set a new strategic course following the arrest of its de facto head and a sharp slowdown in its smartphone business in China.

But analysts say the changes, which were delayed for months due to a corruption scandal that led to the incarceration of vice-chairman Lee Jae-yong, do not go far enough.

“Samsung urgently needs to replace under-performing, old executives to maintain efficient operations. Such a personnel reshuffle is still overdue,” said Kim Young-woo, an analyst at SK Securities.

Choi Kyung-sik, a former head of Samsung’s operations in Poland, was promoted to lead marketing efforts at the company’s mobile division. Kwon Gye-hyun, who once served as head of security and diplomatic affairs for South Korea’s presidential office, was tapped to head Samsung’s operations in China, where its smartphones have faced intense competition from local rivals Huawei and Oppo.

“Any key personnel changes are unlikely until Mr Lee gets released from jail,” added Mr Kim.

Mr Lee, the 48-year-old son of Samsung chairman Lee Kun-hee, was detained earlier this year on bribery, embezzlement and perjury charges in connection with a political corruption scandal that triggered the election of a new South Korean president this week.

Mr Lee, one of South Korea’s most powerful men, denies the charges.

His arrest and ongoing trial have the potential to upend his plans to eventually take over formal control of the conglomerate from his father — currently incapacitated in hospital — as well as shake up the company’s corporate governance.

Despite the turmoil, Samsung’s business is thriving, with its stock hitting a record high on Monday. Last month, the company reported its best quarterly operating profit in more than three years.

The semiconductor division was the biggest driver of earnings, accounting for nearly two-thirds of operating profit. But the company has also reported positive early sales of its new smartphone, the Galaxy S8.

The company said recently it expects the new device to outsell its predecessor, the S7, which sold more than 48m units in its first year.

Samsung’s outlook for smartphones, however, is bleak in the world’s largest market: China.

According to Counterpoint, a market research group, Samsung’s share of the country’s smartphone market fell to 3.3 per cent in the first quarter, down from 8.6 per cent a year earlier.

“I think a lot will depend on what and how much the new head intends to do for Samsung in China,” said Xiaohan Tay, an analyst with IDC.

“There’s a lot of changes that he needs to do for Samsung in terms of improving its brand image in China [and] having specific marketing messages to cater to the Chinese crowd.”

Mr Kim of SK Securities added: “Samsung’s China performance in the first quarter was the worst. [It] is trying hard to regain lost ground with the S8 launch but it will be difficult to reverse the trend given the . . . stiff competition with local rivals.”

Additional reporting by Kang Buseong