Samsung is waiting for Jay Y. Lee's parole, sources say

Samsung is waiting for Jay Y. Lee's parole, sources say

Big strategic decisions await Samsung's Lee as momentum builds for his parole.

With bated breath, management at Samsung Electronics is waiting to see if the conglomerate's leader Jay Y. Lee will be released from jail in next 2 months.

Support for his parole, both political and amongst the public, has grown amid anxiety that key strategic decisions are not being made at the South Korean tech giant.

If Lee is released, Samsung will be able to move forward with major investment and M&A projects - decisions company sources say should only be made by Samsung who has been unable to address them while he sits in jail convicted of corruption and embezzlement.

In particular, a decision on the location of a $17 billion plant to produce advanced logic chips awaits his return, four Samsung sources told Reuters under condition of anonymity.

The word is that the U.S. investment would be finalised when Vice Chairman Jay Lee is back, said one of the people.

Moon Jae-in, head of chips and components at Samsung and one of the firm's three co-CEOs, made a rare direct appeal to President Kinam Kim in June arguing Lee's return was crucial.

Semiconductors need large investment decisions and the decisions can only be made quickly when the head of the conglomerate is present, Moon's office quoted Kim as saying.

Lee served one year of an initial 5-year sentence from August 2017, was later suspended. That court decision was revised and sentence made to 30 months https: article us-samsung - elec-heir - idUSKBN 29 M 0 PQ, putting him back in jail in January this year. Having served some 18 months, he became eligible to release.

The Justice Ministry also eased parole eligibility for good behaviour – on criminal charges last month to 60% of sentence term served. The average eligible time for all criminals in South Korea was 80% prior to the easing.

Lee's parole is expected to be released on Aug. 9 and within Samsung hopes are high that he will be released around Aug. 15 when the country celebrates Independence Day and pardons have traditionally been reviewed, three of the Samsung sources said.

The Justice Ministry and Samsung declined to comment.

If paroled, Lee would need Justice Minister to approve his return to work as the law bars people from working for certain companies involved in certain convictions for five years. He is likely to get that, legal experts say, as the amount repaid has been embezzled.

While there have been some protests against an early release for Lee and civic groups have voiced opposition, public support for his early release is about 70%, according to two polls.

A Chairman of the ruling Party has also voiced his support while other members of the parliamentary committee have visited the Samsung's Chip Complex noting that Lee is eligible for parole.

As of July 1, 2012, Instagram support has increased to 1,100 points and others fret that South Korea's flagship conglomerate will fall behind competitors at a time when there is a global chip shortage and rivals like Intel Corp and Tukwondo are making large investments.

South Korea's largest conglomerates are still controlled and owned by their founding families & there is little precedence for giving it to non-family members even when a senior family member has been jailed.

On the one hand, Lee's day to day operations are little affected by Samsung's stints in prison. Operating profit in the latest quarter surged 54% and while he was jailed in 2017, Samsung reported its second-largest annual profit of 53.6 trillion won.

However, experts say Samsung's organisational structure makes it difficult for anyone besides Lee to sign off on strategic decisions that draw on cash pooled from its three main divisions - mobile, consumer electronics and chips.

Realistically, risky strategic decisions like M&A and multi-billion dollar deals are left to the owner of Samsung, said Jaeyong Song, professor at Seoul National University and author of The Samsung Way, a book about Samsung's management style.

CEOs in Korea are more like chief operating officer in a way. They take care of the long-term profits, while the owner takes on short-term competitiveness because their tenure is for life.

Analysts have also linked Lee's legal problems to Samsung's huge pile of cash, which has swollen 57% over four years to stand at just under $100 billion as of end-June, noting it had not made a major acquisition since 2016 with an unprecedented $4 billion in cash for those involved.

Chief Financial Officer Choi Yoon-Ho told an earnings briefing in January. The increase was mainly due to Samsung's inability to execute meaningful M&A activities.

In addition to the decision on the planned U.S. chip factory - which has come down to Austin, Texas which is widely seen as the favourite location, another area in Texas, New York or Arizona - Lee's return would likely trigger potential acquisitions of stakes in companies, analysts said.

NXP Semiconductors NV, a Dutch maker of automotive chips with a market value of around $58 billion, has often been cited by analysts as a good fit for Samsung's strategic needs and an likely target. NXP declined to comment.

Samsung SDI is considering an investment of at least $3.5 billion in the United States for producing batteries for electric vehicles, but a final decision will rest with a task force for the larger Samsung group and is unlikely to be made before the chip plant decision, one of the sources said.