Samsung Electronics CEO resigns over ‘unprecedented crisis’

Samsung Electronics chief executive Kwon Oh-hyun has resigned citing an “unprecedented crisis”.

It is the latest management upheaval at the firm after the heir of the entire Samsung Group was imprisoned for corruption in August.

Mr Kwon is one of three co-chief executives of Samsung Electronics.

His resignation comes on the same day the firm forecast record quarterly profits, citing higher memory chip prices.

Mr Kwon said he had been thinking about his departure “for quite some time” and could “no longer put it off.”

“As we are confronted with unprecedented crisis inside out, I believe that time has now come for the company [to] start anew, with a new spirit and young leadership to better respond to challenges arising from the rapidly changing IT industry,” he said in a statement.

He will remain on the board of Samsung Electronics until March 2018.

Management crisis

Ryan Lim, founding partner of the Singapore technology consultancy QED said “Samsung is in a leadership crisis situation”.

Mr Lim said “the current management structure seems to be a complicated web that does not clarify, but rather confuses”.

“This needs to be resolved soon as it can be worrying not to know who is truly steering the Samsung behemoth into the future,” he said.

In response to the criticism, a spokesperson for Samsung Electronics told the BBC that a successor would be appointed “soon” but could not give a timeframe.

Corruption charges

Samsung Electronics is regarded as the jewel in the crown of the Samsung Group conglomerate, which is made up of 60 interlinked companies and is one of South Korea’s massive family-run businesses known as chaebols.

In August, the group’s heir apparent Lee Jae-yong was convicted of bribery and corruption and sentenced to five years in jail.

Mr Lee was accused of giving donations worth 41bn won ($36m; £29m) to non-profit foundations operated by Choi Soon-sil, a friend of South Korea’s former President Park Geun-hye, in return for political favours.

He was back in court on Thursday, appealing against his jail term.

Image copyright Getty Images
Image caption Lee Jae-yong was convicted in August on corruption and bribery charges

Andrew Milroy, head of advisory services at technology consultancy Ovum, said Samsung needed to regain the confidence of the government and financial markets in the aftermath of the corruption scandal.

“This may mean new senior management who are not associated with the past,” he said.

Record profits

However, the leadership troubles do not appear to have hit the company’s bottom line yet.

Ahead of the announcement from Mr Kwon, Samsung Electronics said it would report a record quarterly profits thanks to surging chip prices.

Image copyright Getty Images

The world’s largest smartphone maker said operating profit in the three months to the end of September is expected to have tripled from a year earlier.

The forecast profit of 14.5tn won (£9.65bn; $12.81bn) beats market expectations for the quarter.

While memory chips were the main driver of Samsung’s profits, its mobile phone business was given a boost by its new Note 8 smartphone which received the firm’s highest number of pre-orders.

But scope for continued earnings growth from smartphones is likely to narrow. Ovum’s Mr Milroy said the market was slowing and despite record results the company “faces a lot of risk”.

“It may be felt that someone new can drive greater innovation and manage the firms move into new areas as the smartphone market matures,” he said.

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