Written by Raymond Zhong
Lee Kun-hee, who built Samsung into a global giant of smartphones, televisions and computer chips but was twice convicted — and, in a pattern that has become typical in South Korea, twice pardoned — for white-collar crimes committed along the way, died Sunday in Seoul, the South Korean capital. He was 78.
Samsung announced the death but did not specify the cause. Lee had been incapacitated since a heart attack in 2014.
When Lee took the helm at Samsung Group in 1987, after the death of his father and the conglomerate’s founder, Lee Byung-chul, many in the West knew the group’s electronics unit only as a maker of cheap televisions and unreliable microwave ovens sold in discount stores.
Lee Kun-hee pushed the company relentlessly up the technological ladder. By the early 1990s, Samsung had surpassed Japanese and American rivals to become a pacesetter in memory chips. It came to dominate flat-panel displays as screens lost their bulk. And it conquered the middle-to-high end of the mobile market as cellphones became powerhouse computing devices in the 2000s.
Samsung Electronics today is a cornerstone of South Korea’s economy and one of the world’s top corporate spenders on research and development. Lee — who was chairman of Samsung Group from 1987 to 1998, chairman and chief executive of Samsung Electronics from 1998 to 2008, then Samsung Electronics chairman from 2010 until his death — was South Korea’s richest man.
He and his family members used a web of ownership arrangements to exert influence over the other companies under the Samsung umbrella. Over the course of his tenure, even as professional managers came to have more responsibility at the group, Lee remained Samsung’s big thinker, the provider of grand strategic direction.
But his reign also showcased the sometimes dubious ways in which South Korea’s family business empires, known as chaebol, safeguard their influence. South Korea’s corporate dynasties are such a major source of economic vitality that some South Koreans wonder whether the chaebol are holding their country hostage.
In 1996, Lee was convicted of bribing the country’s president, then pardoned. More than a decade later, he was found guilty of tax evasion but given another reprieve, this time so he could resume lobbying to bring the Winter Olympics to the mountain town of Pyeongchang in 2018.
Soon after the Pyeongchang Games, Lee Myung-bak, South Korea’s president from 2008 to 2013 and no relation, was sentenced to 15 years in prison for accepting $5.4 million in bribes from Samsung in exchange for pardoning Lee.
Lee Kun-hee was born in Daegu, in Japanese-occupied Korea, on Jan. 9, 1942, to Park Doo-eul and Lee Byung-chul, who had founded Samsung a few years earlier as an exporter of fruit and dried fish. The younger Lee was a wrestler in high school.
Samsung first grew by dominating the consumer staples, like sugar and textiles, that war-torn Korea needed. It later expanded into insurance, shipbuilding, construction, semiconductors and more. Lee Kun-hee graduated from Waseda University in Tokyo in 1965. He then studied in a master’s program at George Washington University but did not receive a degree.
He started his career at Tongyang Broadcasting Co., a Samsung affiliate at the time, in 1966. He worked at Samsung C&T, the conglomerate’s construction and trading firm, before being named vice chairman of Samsung Group in 1979.
When he became chairman in 1987, he took from his father a fixation on planning for the far future, even when times seemed good. But he added an overlay of existential fear and ever-present crisis that persists among Samsung brass to this day.
“We are in a very important transition,” Lee said shortly after taking charge, in an interview with Forbes. “If we don’t move into more capital- and technology-intensive industries, our very survival may be at stake.”
The radicalness of the transition he had mind was made clear when he summoned scores of Samsung Electronics managers to a luxury hotel in Frankfurt, Germany, in 1993. For days, he lectured the executives, urging them to bury old ways of working and thinking. “Change everything,” he said, “except your wife and children.”
Samsung, he decreed, would focus on improving product quality instead of increasing market share. It would bring in talent from overseas, and it would require that senior executives intimately understand foreign markets and how to compete in them.
At the time, all of this was anathema in corporate South Korea.
“It was very much like Mao Zedong trying to change the mindset of the Chinese people,” said Chang Sea-jin, a professor at the National University of Singapore.
In 1995, as part of the emphasis on quality, he visited a Samsung plant in the town of Gumi after a batch of cellphones was found to be defective.
What happened next became legend. According to “Samsung Electronics and the Struggle for Leadership of the Electronics Industry,” a 2010 book on the company by Tony Michell, the Gumi factory’s 2,000 workers gathered in a courtyard and were made to wear headbands labeled “Quality First.” Lee and his board of directors sat under a banner that read “Quality Is My Pride.”
Together they watched as $50 million worth of phones, fax machines and other inventory was smashed to bits and set ablaze. The employees wept.
Lee’s business record was not unblemished. Believing that electronics would become integral to cars, he started an automobile unit in the mid-1990s. Samsung Motors was sold off in 2000.
A dalliance with Hollywood was similarly short lived. In 1995, Steven Spielberg sounded Lee out over dinner about investing in a movie studio. Despite being a movie buff, the chairman and other Samsung executives ended up talking mostly about microchips.
“I thought to myself, ‘How are they going to know anything about the film business when they’re so obsessed with semiconductors?’” Spielberg later recalled. “It was another one of those evenings that turned out to be a complete waste of time.”
Samsung entered a phase of global conquest in the 2000s, using flashy devices and sleek marketing to implant its name firmly into the minds of Western consumers. Lee, however, was rarely seen in public. He was a devoted collector of sports cars and fine art.
By 2007, he had identified the next looming crisis for Samsung. China was ascendant in low-end manufacturing, while Japan and the West still led in advanced technologies. South Korean companies — Samsung included — were sandwiched in between.
But as he got started on his next overhaul of the Samsung way, accusations surfaced that he had dodged taxes on billions of dollars supposedly stashed in secret accounts. Instead of fighting the charges, he stunned South Korea by announcing his resignation on live television.
“I promised 20 years ago that the day when Samsung was recognized as a first-class business, the glory and fruition would all be yours,” he said in 2008, addressing employees, his voice a near whisper. “I truly apologize for not having been able to keep that promise.”
He was pardoned the following year and was made Samsung’s chairman again in 2010.
After a heart attack in 2014, his son and vice chairman of Samsung Electronics, Lee Jae-yong, became the company’s de facto public face.
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