Eighteen months ago I traveled to Seoul, South Korea to report an article about Samsung’s heir apparent, Jay Y. Lee, son of the tech giant’s ailing leader. In reality, the third-generation scion already had taken over from his father and in his behind-the-scenes way had been steering the giant corporate ship for some time.
I quickly learned that the Korean people have a love-hate relationship with the country’s biggest company. They are proud of their conglomerates, known as chaebols, because they have become globetrotting companies that reflect well on Korea’s place in the world economy. However, many teem with resentment toward giants like Samsung, which benefit from favorable treatment by the government and tend to stifle innovation among small fry.
Now the conglomerates and the political class that has nurtured them are mired in crisis. At the surface, the turmoil is over influence-peddling allegations involving the country’s president, one of her friends, and the conglomerates. (The New York Times published this excellent overview of the situation.) Read between the lines, and it’s possible to see how this scandal could shake the conglomerates to their core. As for Samsung’s putative leader, Jay Y. Lee met with the president around the time my article came out, which also coincided with Samsung narrowly defeating the U.S. hedge fund Elliott Management in a proxy battle that would have weakened the Lee’s family control of its company.
Samsung has taken its knocks lately. Even before this current mess struck, Elliott had renewed its battle and the company faced the debacle of its phones exploding. Embarrassingly, airline passengers are reminded of Samsung’s shame every time they board a plane.
Still, partly because of Samsung’s convoluted governance, it is able to be patient. It is sinking billions into a new business line called “biosimilar” drugs. Sales of its memory chips and organic light-emitting diode screens for smartphones are surging, and could fuel its best quarterly profit in three years. There is even enthusiasm for a new phone, the Galaxy S8, expected later in 2017. At the Consumer Electronics Show in Las Vegas this week I expect to see, as usual, row after row of razor-thin-screened Samsung televisions.
It takes more than product fiascos and political scandals to kill a patient conglomerate.
BITS AND BYTES
Qualcomm refreshes chip line, gets cozier with SoftBank. The company’s latest Snapdragon offering will enable thinner smartphone handsets with larger batteries and draw less power than its predecessors. It’s also being pitched as a viable option for connected cars and smartglasses, which could help Qualcomm grow beyond its core markets. Meanwhile, it looks like the chipmaker will contribute an undisclosed amount to SoftBank’s $100 billion technology fund, joining Apple. (Fortune, Wall Street Journal, Wall Street Journal)
Intel maps its future. The chip giant is buying 15% of the automotive mapping service, HERE, joining carmakers Audi, BMW, and Daimler. Intel also started shipping the latest additions to its core processor product line, codenamed Kaby Lake, which are being shown off at CES in gaming laptops, desktops, VR/gaming machines, and enterprise PCs. (Fortune, VentureBeat, Ars Technica)
Rivals Ford and Toyota are creating a connected car alliance. The group, called SmartDeviceLink Consortium, is working on open source software that will allow “seamless integration” between vehicles and smartphones. The goal is to reduce the automotive industry’s reliance on proprietary software from the likes of Apple and Google. (Fortune)
Alibaba flexes logistics muscle with Maersk. The two are collaborating on a system that helps companies book space on Maersk container ships directly using an app written by the Chinese e-commerce giant, rather than relying on a separate booking organization. (Reuters)
Tesla blows its shipment goal, looks in rearview mirror. Elon Musk’s company delivered 76,230 electric vehicles in 2016, which was shy of its 80,000-car projection. The main cause was Tesla’s production problems early last year. Meanwhile, would-be rival Faraday Future is taking reservations for its forthcoming Internet-connected, autonomous vehicle, the FF91, which won’t hit roads until at least 2018. (Fortune, Fortune, Wall Street Journal)
Toshiba faces more financial allegations. The company is still feeling the fallout from a $1.3 billion accounting scandal revealed two years ago. This time, the company’s computer division is under scrutiny for allegedly padding profits between 2012 and 2014. (Reuters)
L’Oreal thinks we need a smarter hairbrush. The device, which will cost around $200, will come with sensors designed to measure the quality of a user’s hair as well as the effects of different hair care routines. (Fortune)
The Xerox breakup is now official. The company’s business services unit, Conduent, started trading as a separate company on Tuesday. Their stock diverged in the debut, with the legacy business posting a nearly 20% gain and Conduent slipping about 8%. How will the newly independent company, which handles everything from human resources services for healthcare companies to mobile parking apps for the city of Los Angeles, find new growth? Conduent CEO Ashok Vemuri spoke with Fortune‘s Jonathan Vanian about splitting from Xerox, competing with IBM and Hewlett Packard Enterprise, and new beginnings.
IN CASE YOU MISSED IT
What the Washington Post’s Hacked Electrical Grid Report Got Wrong, by Robert Hackett
Lenovo’s Smart Assistant Is an Amazon Echo Alternative, by Don Reisinger
Facebook CEO Mark Zuckerberg Plans Epic 2017 Road Trip, by Jonathan Vanian
What to Know About Dell’s Gaming Ambitions, by Don Reisinger
ONE MORE THING
People sure are addicted to mobile games. Shoppers spent almost $1 billion on video game applications for smartphones and tablets during the 2016 holiday season, a more than 50% increase over the previous year. (Wall Street Journal)