Samsung CEO Kwon Oh-hyun Announces Shock Resignation as Profits Surge

Kwon Oh-hyun’s resignation deepens concerns of a leadership vacuum at the tech giant.

Samsung Electronics Co Ltd ssnlf said on Friday its CEO and Vice Chairman Kwon Oh-hyun plans to step down from management, deepening concerns over a leadership vacuum at the tech giant after group scion Jay Y. Lee was jailed for bribery.

The surprise resignation of Samsung’s chip and display head came as he was expected to take a bigger role following Lee’s arrest in February and the departures of other key executives in the wake of the bribery scandal.

The move came on the same day the South Korean smartphone maker forecast record third-quarter operating profit on the back of the memory chip business which Kwon was instrumental in building into the world leader.

“The timing is nonsensical. Samsung tipped record earnings, it’s going to be better in the fourth-quarter, and all that’s been driven by Kwon’s components business,” said Park Ju-gun, head of research firm CEO Score.

Kwon, 64, is seen as Samsung Group No. 2. As well as being chairman of the board and a board director, he heads the components business – including memory chips – and the display business.

In a statement, the man known as “Mr Chip” said the time had come to “start anew with new sprit and young leadership”.

“We are fortunately making record earnings right now, but this is the fruit of past decisions and investments; we are not able to even get close to finding new growth engines by reading future trends right now,” he added.

The world’s biggest maker of memory chips, smartphones and TVs is set to smash its annual profit record this year, thanks partly to soaring demand for memory chips. Semiconductors were Samsung’s top earner in the three months through June, making a record 8 trillion won ($ 7.20 billion).

The global chip industry is undergoing a major shift with Japan’s Toshiba Corp partnering with home rival SK Hynix, and other firms consolidating in search of new growth areas like artificial intelligence and automobiles.

Shares in Samsung, worth about $ 350 billion, fell 0.6 percent on Friday after hitting an all-time high earlier in the day.

CHANGING THE OLD GUARD

The departure of 32-year Samsung veteran Kwon after five years in the top job comes at a time of leadership uncertainty at the company.

Choi Gee-sung, Jay Lee’s mentor, quit earlier this year for his alleged role in the bribery scandal, and Samsung Electronics now needs to fill several more key roles with Kwon’s exit.

Kwon would serve out his term as chairman of the board and board director until March 2018, the company said. He is also not stepping down immediately from his two other roles.

A Samsung Electronics spokeswoman declined comment on the exact timing of succession and potential successors for Kwon’s roles.

While Samsung Group is South Korea’s top conglomerate with businesses ranging from smartphones to hotels – it has had no ‘Plan B’ for taking big decisions following Lee’s arrest, people familiar with the matter have said.

“I‘m worried about a leadership vacuum at a time when Lee is absent from management,” Chung Sun-sup, chief executive of research firm Chaebul.com, said following Kwon’s announcement.

The leadership changes also could be an opportunity for a new generation to emerge, he added.

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Samsung scion's defense fights back as legal appeal begins

SEOUL (Reuters) – The heir to South Korea’s Samsung Group appeared in a packed court on Thursday for the first day of arguments in the appeal of his five-year jail term for corruption.

The 49-year-old Jay Y. Lee was convicted by a lower court in August of bribing former president Park Geun-hye to help strengthen his control of the crown jewel in the conglomerate, Samsung Electronics, one of the world’s biggest technology companies.

The appellate court hearing the appeal is likely to try to rule on the case by next February, legal experts said. Whichever side loses could take the case to the Supreme Court, the final court of appeal in South Korea.

Lee’s presence marked his first public appearance since the August ruling. He did not speak during the early proceedings other than giving his birth date and address.

The lower court in August had ruled that while Lee never asked for Park’s help directly, the fact that a 2015 merger of two Samsung affiliates did help cement Lee’s control over Samsung Electronics “implied” he was asking for the president’s help to strengthen his control of the firm.

The defense strongly challenged the lower court’s logic that Lee’s actions “implied” solicitation for help from Park by providing financial support for the former president’s close friend and confidante Choi Soon-sil.

The prosecution, which has lodged a cross-appeal against the lower court ruling that found Lee innocent on some charges, said the court’s decision to not acknowledge explicit solicitation for Park’s help from Samsung despite the evidence found “did not make sense”.

DEFENSE FIGHTS BACK

The defense, which spent much of its time during the initial trial refuting the prosecution’s individual charges, is expected to focus on a few key arguments in the appeal – including whether there was in fact an “ordinary type of bribery” as defined under South Korean law, which says only civil servants come under the statute.

Park’s friend Choi was not a civil servant.

The lower court found that Samsung’s financial support of 7.2 billion won ($ 6.27 million) to sponsor the equestrian career of Choi’s daughter constituted an ordinary type of bribery, as “it can be considered the same as she (Park) herself receiving it.”

The defense is expected to strongly challenge this by saying that the prosecution, on whom the burden of proof lies, has not proved collusion between Park and Choi.

Reporting by Joyce Lee; Additional reporting by Heekyong Yang; Editing by Neil Fullick

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U.S. Supreme Court rejects Samsung appeal in warranty dispute

WASHINGTON (Reuters) – The U.S. Supreme Court on Monday refused to consider a bid by Samsung Electronics Co Ltd (005930.KS) to force customers who have filed proposed class-action lawsuits against the company to arbitrate their claims instead of bringing them to court.

The justices left intact a lower court’s ruling that purchasers of certain Galaxy smartphones made by the South Korean electronics company were not bound by a warranty provision that compelled arbitration of customer complaints.

Warranties with arbitration clauses have become common in consumer electronics and other industries. Courts and regulatory agencies increasingly are scrutinizing arbitration agreements that seek to limit options for resolution of future disputes.

The Samsung case involves two smartphone buyers from California who separately filed proposed class-action lawsuits in 2014 over concerns about the products’ performance and resale value.

Neither Daniel Norcia, who owned an Galaxy S4 device, nor Hoai Dang, who owned an SIII, saw the arbitration provisions when they bought the phone because the language was placed deep inside the warranty booklet and not mentioned on the box, according to their legal papers.

The agreement states that all disputes must be resolved through arbitration, and specifically rules out class actions.

Samsung tried to force the customers to arbitrate their claims, but a unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco denied the request in January. The court said Samsung did not provide proper notice of the arbitration provision and neither customer had expressly consented to be bound by it.

Appealing to the Supreme Court, Samsung noted that the 9th Circuit decided that the warranty was valid except for the arbitration provision. Samsung argued that the 9th Circuit ruling violated a U.S. law called the Federal Arbitration Act that requires arbitration agreements to be treated equally with other contracts.

Reporting by Andrew Chung; Editing by Will Dunham

Our Standards:The Thomson Reuters Trust Principles.

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