Samsung Heir Takes Reins of Tech Giant Stuck in Father's Past


SEOUL—Under Lee Kun-hee’s leadership,

Samsung Electronics Co.

became a ubiquitous name world-wide by muscling into living rooms with flat-screen TVs and sliding into consumers’ pockets with slick smartphones.

That chapter closed for the South Korean tech giant on Sunday with Mr. Lee’s death. Now, his son, Lee Jae-yong, who has been Samsung’s de-facto leader since 2014, formally takes the reins at a very different time for the tech industry, where Samsung is on the defensive and struggling to evolve.

Under the late Mr. Lee, Samsung had dominated in tech hardware. But now, the industry’s gravity has shifted from products to the software that controls them, from artificial intelligence to apps to consumer data.

Over the past six years, Samsung, unlike

Apple Inc.,

has failed to create homegrown software or services that would drive loyalty for its array of products. It is still a successful, though vulnerable, maker of nearly every major electronics product on Earth, plus many of the core components required to assemble them, from smartphone displays to a computer’s gigabytes of storage.

Instead of a transformation under Lee Jae-yong, Samsung has struggled as Chinese rivals matched them on features and beat them on price.

Amazon.com Inc.

and

Alphabet Inc.’s

Google, with greater expertise in services than Samsung, have launched popular home speakers or smartphones.

Lee Kun-hee, who was 78 when he died, was known for making massive bets, even imploring executives to “change everything except for your wife and children.” In 1974, he was so sure that Samsung should venture into semiconductors that he invested his personal money to buy a 50% stake in the financially troubled Korea Semiconductor.

Samsung’s Lee Kun-hee, right, and his son Lee Jae-yong, left, in 2009. Lee Jae-yong was the conglomerate’s de facto leader in his father’s stead since 2014.



Photo:

pool new/Reuters

His father Lee Byung-chull, the founder of the nascent Samsung conglomerate, eventually was persuaded. It proved to be game changing: in the 1990s, Samsung Electronics leapfrogged Japanese rivals and now memory chips represent the company’s biggest cash cow.

A clear management style has yet to emerge for Lee Jae-yong—who goes by Jay Y. in the West—and is 52, trilingual and Harvard-educated.

His father and grandfather oversaw Samsung during the Japanese colonial period and later in the aftermath of the Korean War, leaving both with a driving hunger to succeed, said Mike Cho, a business professor at Korea University in Seoul, who has long followed Samsung as a South Korean corporate governance expert. It is unclear what drives Samsung’s third-generation leader, he adds.

“Jay Y. was born into a family which was by nature rich, and already established,” Mr. Cho said. “He has a very different kind of education.”

Little is expected to change right away at the Samsung conglomerate, which spans dozens of affiliates in which Samsung Electronics is the crown jewel, industry experts say. Mr. Lee, like his father, leaves the day-to-day operations to three Samsung Electronics CEOs, though any major decision must have his blessing.

How Lee Kun-hee’s shares eventually transfer to his son or two daughters remains unknown. South Korean officials are expected to assess the inheritance tax—which could be as high as 60% for the Samsung shares—over the next months.

Mr. Lee has previously said he spends about 95% of his time focused on Samsung Electronics, the conglomerate’s most valuable arm. Mr. Lee’s sisters are unlikely to battle their brother for control of Samsung Electronics as chairman, though they could seek to spin off other parts of the conglomerate for themselves, said Park Sang-in, a professor at Seoul National University, who studies succession planning at South Korea’s dynastic companies.

Samsung boasts the world’s fifth most-valuable brand, according to Interbrand, trailing only Apple, Amazon,

Microsoft

and Google. But the company’s branding has long emphasized product flourishes over the personalities of the people actually calling the shots.

Fluent in English, Lee Jae-yong, did hobnob more than his predecessors after taking over for his ailing father. He cultivated relationships with Silicon Valley elite, including Apple’s Tim Cook, and even attended the well-known Sun Valley conference in Idaho.

In a sign of his and the company’s standing, Mr. Lee was the only non-U.S. executive invited to a White House gathering of industry leaders with then President-elect Trump, just weeks after the November 2016 election.

His father’s poor health long dissuaded Mr. Lee from making more public appearances, all the more important given South Korea’s culture favoring tradition and hierarchy, Samsung insiders have said. Until his death, Lee Kun-hee held the title of Samsung Electronics chairman. His son was bestowed with vice chairman.

He also faces ongoing legal issues. He was convicted of bribing South Korea’s president in 2017 and spent nearly a year in jail. The case is still being resolved in an appeals court. Last month, prosecutors indicted him again for financial fraud. Mr. Lee has previously denied wrongdoing.

In recent years, Mr. Lee’s business dealings, partly due to his father’s health and his legal woes, have also remained low-key. Despite holding close to $80 billion in cash, Samsung hasn’t pulled the trigger on any major acquisitions that could expand the business empire. Samsung last year did announce more than $110 billion in investments by the end of the decade, though the funds were largely earmarked for existing lines of business.

What Mr. Lee has said publicly often expresses a desire to step out of his family’s shadow—and the past. During the bribery scandal, he promised lawmakers during a 2016 legislative hearing to “throw away the old ways.”

Earlier this year, Mr. Lee issued a rare apology over the bribery scandal and other issues related to his succession, promising he wouldn’t pass down his role to his children. But he made no concrete commitments for how he would do so.

“The environment that surrounds Samsung now is completely different from what it was before,” Mr. Lee said at the time.

Write to Elizabeth Koh at Elizabeth.Koh@wsj.com

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