TECHnalysis Research Blog Extra

February 17, 2017
Samsung Heir Arrest Unlikely to Impact Sales

By Bob O'Donnell

The family heir to the Samsung group has been facing legal and political battles for some time, but the situation took a turn for the worse this week when a South Korean court ordered Vice Chairman Jay Y. Lee’s arrest on bribery, perjury, embezzlement and other charges. Embroiled in the intrigue of South Korean politics and massive demonstrations about government corruption there, many leaders of South Korea’s family-owned conglomerates known as “chaebols” (of which Samsung is the largest) have been under intense public pressure for greater transparency recently.

Outside of Korea, the question boils down to, how will this impact Samsung’s various businesses, notably Samsung Electronics, and the Samsung brand? Frankly, probably not much. Given the company’s surprisingly respectable smartphone shipments last quarter after the disastrous Galaxy Note 7 recall, it’s clear that the Samsung brand is remarkably resilient. Potential leadership, or even structural, changes that could eventually happen at the company as the result of this arrest will likely have almost no short-term impact, and probably not much long-term impact, on the company’s sales.

The truth is, most people who buy devices from a given company don’t really know or care that much about company leadership. So, while this story may grab a lot of headlines and create a lot of bad press for Samsung, it won’t likely impact their financial results. Plus, even if there are significant changes in company structure because of this event, they would likely take years to happen, and several more years to really be felt.

On top of that, despite the fact that there are many companies that have “Samsung” at the front of their name, most of these companies now operate very independently. Witness the challenges that Samsung SDI, the battery maker, had with Samsung Electronics, the phone maker. In a completely coordinated single company effort, something like the Galaxy Note 7 battery issues wouldn’t occur, but SDI is just seen as another supplier by Samsung Electronics, not a division or even sister company.

While there’s no question that the latest developments for Samsung leadership are unfortunate, it’s important not to overestimate what their true impact will (or will not) be.

Here's a link to the column: https://techpinions.com/unpacking-the-weeks-news-friday-february-17-2017/48918

Bob O’Donnell is the president and chief analyst of TECHnalysis Research, LLC a market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.