Decisive leadership is what enabled Samsung to establish its dominance in lucrative industries such as memory chips, displays, and mobile devices. However, it appears that top leaders at the company now prefer to avoid risk, even as mounting business challenges make it fall behind rivals.
Samsung faces a challenging business environment in all of its crucial business segments. The lack of major mergers and acquisitions has also put the company at a disadvantage, as legal challenges for the heir put significant strategic decisions on the back burner.
Samsung continues to face strong business challenges
A report in Nikkei highlights how an employee in a research and development role was surprised when told by a direct supervisor that “We can't give the go-ahead to your improvement proposal unless there is precedent.”
The employee had presented a proposal that would have helped increase production yield. They wanted to pursue this idea “precisely because there is no precedent,” but apparently upper management shot down the idea. The employee added that while they are guaranteed the “highest level of compensation” by being at Samsung, but they find themselves unable to do the work they wanted to do over the past few years.
One reason for this risk averse outlook might be the fact that Samsung's most senior managers are reporteldy only provided one-year contractors. If they're unable to meet targets during that time, their contracts aren't renewed. So in a highly competitive environment, managers urge their staff to focus on generating deliverables in a very short time frame, instead of taking up too much time working on R&D projects.
Another engineer who left Samsung for rival chipmaker SK Hynix highlighted the difference in culture at both organizations. SK actively adopts new ideas because it needs to do that to compete with Samsung's dominance. This worked out well for SK Hynix in the high-bandwidth memory segment where it got the lead on Samsung, with the conglomerate now rushing to catch up.
Things aren't looking up elsewhere, either. Samsung had a stated goal of becoming the global leader in system semiconductors by 2030, yet it's nowhere close to achieving that. It's falling behind TSMC and with Intel establishing a foundry business, backed by billions in grants from the US government, it puts further pressure on Samsung. The Chinese competitors are also biting at Samsung's heels across all four of its main business segments – home electronics, smartphones, chips, and displays.
The sense of urgency that once persisted the rank and file appears to be missing. Former Chairman Lee Kun-hee had himself said in 2010 that Samsung's leading products would “disappear in 10 years,” highlighting the importance of R&D and the constant need to introduce newer product lines to not just sustain dominance but to also further increase it. All eyes on Samsung now as it faces these challenges.
