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(LEAD) (News Focus) Samsung to face challenges over looming leadership change
SEOUL, Nov. 26 (Yonhap) -- Samsung Electronics chairman Lee Kun-hee has made Samsung a household name in the United States and Europe as well as South Korea after taking over the company from his late father, Lee Byung-chull, in 1987.

   What began as a small trading company that sold groceries in 1938 is now the Samsung Group, spanning businesses that deal in electronics, engineering, insurance, clothing and an amusement park.

   Some experts claim Samsung Group could face challenges in coming years as Lee Kun-hee has yet to come up with specific measures on how and when to hand over his management control of the country's largest family-run conglomerate.

   "The biggest challenge facing Samsung is Lee Kun-hee's desire" to keep his management control over Samsung, said Kim Sang-Jo, a professor at Hansung University. Kim claimed Lee has yet to make a decision on how to hand over his control.

   Under Lee's stewardship, sales of Samsung Group stood at 383 trillion won (US$352 billion), a 39-fold increase between 1987 and 2012, a dramatic development that contributed to Samsung's being ranked as the world's No. 9 brand.

   Samsung appears likely to ship goods worth $156.7 billion in 2012, accounting for 28.2 percent of South Korea's total exports, up from 13.3 percent in 1987, according to data released by Samsung.

   The transformation apparently came after Lee Kun-hee called on his employees to "change everything but your wife and kids," during a trip to Frankfurt in 1993.

   Two years later, he also ordered the burning of wireless phones worth 15 billion won, in a bold move to help reduce the error rate on assembly lines.

   Now, Samsung Electronics Co. has become the world's top maker of smartphones as well as memory chips. The tech giant has been locked in a high-stakes patent war against Apple Inc., the California-based maker of the iPhone, over the $219 billion global smartphone market since April last year.

   Apple filed another lawsuit against Samsung Electronics for patent infringement on the South Korean tech titan's six latest mobile products, FOSS Patents.com, a German patent blog, reported Sunday.

   Samsung stepped up its fight against Apple by filing a suit on the iPhone 4 and iPhone 4S in April, followed by another that included the iPhone 5 last month and the latest iPad series on Nov. 22.

   Samsung Electronics is expected to post an operating income of 28.6 trillion won on revenue of 200 trillion won this year, according to a recent analysis of local securities firms compiled by researcher FnGuide.

   Samsung Electronics posted a net profit of 6.6 trillion won in the July-September period, compared with 3.4 trillion won a year earlier, as strong sales of its flagship smartphone Galaxy S3 continued to boost its profit margin.

   Samsung Electronics' mobile phone business accounted for more than 40 percent of total net profits of 81 affiliates of Samsung Group last year, a development that experts warned could pose a threat to the conglomerate in case its mobile phone business suffers weak performance.

   Samsung Electronics CEO Kwon Oh-hyun has stressed the importance of nurturing future growth engines through innovation for the company to become a "market creator" in the electronics industry. Samsung had been widely viewed as a "fast follower" which emulated industry leaders in the past.

   Lee Kun-hee also warned last year that Samsung's top products could disappear in a decade as the family-run conglomerate has vowed to pursue environmental and healthcare businesses as part of efforts to tap future growth engines.

   In 2010, Samsung said it will invest 23.3 trillion won on solar cells, rechargeable cells for hybrid electric vehicles and light-emitting diode technologies as well as biopharmaceuticals and electronic healthcare equipment.

   Though Lee has made Samsung Electronics one of the world's most valuable companies, he has been beset by a series of legal troubles stemming from a murky deal that critics claim was meant to help his only son, Lee Jae-yong, gain control of the group through a web of cross shareholdings.

   In August 2009, Lee Kun-hee was sentenced to a three-year prison term and a fine of 110 billion won for illegal bond transactions that caused huge financial losses to a Samsung affiliate.

   However, the prison term was suspended for five years, meaning Lee would not have to serve prison time if he stayed out of trouble during that period.

   Jun Sung-in, an economics professor at Seoul's Hongik University, said questions remained about whether Samsung will abide by laws in transferring management control of the group to one of Lee's children in coming years.

   He said if Samsung violates laws again in the succession process, the issue would pose a threat to Lee's family as well as the entire group.

   In late 2009, Lee received a special presidential pardon in a move officials said was aimed at helping Pyeongchang's bid for the 2018 Winter Olympics. Last year, the alpine town some 180 kilometers east of Seoul won the bid to host the 2018 Winter Games, beating Munich, Germany, and Annecy, France.

   Also troubling Lee is an inheritance suit his elder brother Lee Maeng-hee filed against Lee Kun-hee earlier this year. The elder Lee claimed Lee Kun-hee concealed the bulk of group stocks that their father and Samsung founder Lee Byung-chull held under borrowed names.

   Lee Maeng-hee has asked a Seoul court to order the chairman of Samsung Electronics to return 8.24 million shares of Samsung Life Insurance Co., worth more than 700 billion won.

   "The risk of Samsung lies with its head," Kim said, claiming the 70-year-old makes strategic decisions by himself.

   entropy@yna.co.kr
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