"Now is the real crisis." That was the first message Lee Kun-hee, the late Samsung chairman, delivered when he returned to management in 2010. At the time, Samsung Electronics (005930.KS) was already the world's top electronics company. Even so, watching Toyota's troubles and Apple's innovation, he warned that "within 10 years, most of the businesses and products that represent Samsung today will be gone." The better things look, he said, the greater the danger — a caution against complacency. His gaze was always fixed on tomorrow.
Six years after his death, Samsung Electronics is riding a memory supercycle to record profits. The union is giddy over what it calls "lottery bonuses," and the government is uncorking champagne over a tax revenue windfall.
Outside the company, however, something else is unfolding. China's CXMT, which has reached a 10% share of the DRAM market, is narrowing the technology gap and closing in on Samsung. Tesla is pushing to mass-produce chips at its "Terafab" in 2028, rewriting the rules of competition by ushering in an era in which customers make their own chips. That is why warnings are emerging that this may be Samsung Electronics' last semiconductor boom.
The stock market is already gauging where the memory supercycle ends. The union, nonetheless, remains lost in a pleasant dream. The union at Samsung's semiconductor division is pressing to raise bonuses for loss-making business units. The union at the loss-making finished-products division has demanded that the compensation gap be closed, at one point blocking Chairman Jay Y. Lee's car.
Samsung's management, of course, must take seriously the contribution of the finished-products division and the risk of losing talent. But bonuses are not a share to be divided as a matter of course; they are an incentive for better results. Severing the link between performance and compensation would undermine the basics of management.
The government is not doing its part either. It says it wants to speed construction of a semiconductor fab in the Honam region, yet it remains reluctant to allow flexible application of the 52-hour workweek. It is also leaving unresolved a contradiction in the so-called yellow envelope law, under which the redeployment of workers tied to new fab investment could become subject to union bargaining and industrial action. Instead, its interest lies only in the spoils — piling up the tax revenue swollen by the boom into a future response fund and expanding fiscal spending. Focusing solely on picking the fruit risks destroying the source of the revenue itself.
The more one looks back on Lee's warning about crisis, the more it shines as a valuable piece of advice. Japan's once-invincible memory companies vanished in an instant, and Nokia was pushed off its mobile phone throne long ago. If Samsung fears nothing about tomorrow and gets drunk on today's results, it too can falter. What is needed now is not a celebration but innovation for the next decade.