Since the arrest of the Samsung vice president Lee Jae-yong earlier on Friday, reports say that this may not have any initial impact on the company’s business. The arrest probably won’t affect any of Samsung’s high-profile business ventures like its smartphones or electronics business.
Lee Jae-yong’s promotion to vice president was announced earlier in 2012. In the past, he was seen as simply running the Samsung electronics business for his ill father who is Samsung Chairman Lee Kun-Hee.
Lee Jae-young was arrested due to the charges of bribery that lead to an alleged corruption scandal. The whole fiasco, in turn, led to the impeachment of South Korea’s president, Park Geun-hye.
The lack of impact that Lee’s arrest has on the company could be due to the fact that he isn’t really considered the face of the Samsung brand. Lee also is not part of any of the company’s daily activities. Therefore, his arrest has no short-term effect on Samsung.
Yet long-term effects are a whole different story. Lee’s arrest could pose difficulties on the company’s operations. There is also a possibility that this will affect the management plans for the company’s future.
This scandal comes not too long after Samsung had to do damage control for its Galaxy Note 7 smartphone. The phones suffered overheating, and there were even some reports of the devices exploding. The whole fiasco led to a recall of more than 3 million Galaxy Note 7’s, which cost the company $5 billion in lost profits. Yet even when the phones were replaced, the replacement had to be recalled because they too showed the same problems as the originals. When questioned about the issue Samsung said the blame was with battery suppliers and their faulty batteries.
For its third quarter report, Samsung says that the revenue of if its IT and Mobile Communications department was down by almost 15 percent to 22.5 trillion Korean won (US$ 19.8 billion). There was also a drop-in operation profit for both divisions. Both dropped by 95 percent to 100 billion won which can only be the cause of the Note 7 recall.
