Samsung has long been a dominant force in the technology industry. The company's decisive leadership was a major factor in its success across various lucrative industries. However, it seems that the top leaders at Samsung are now playing it safe, even as mounting business challenges make it fall behind its rivals.
The company is facing a challenging business environment in all of its crucial business segments. It has also failed to make any significant mergers and acquisitions, which has put it at a disadvantage. Legal challenges for the heir have also resulted in significant strategic decisions being put on the back burner.
According to a report in Nikkei, Samsung's risk-averse outlook is affecting its employees' ability to innovate. An employee in the research and development department was told by a direct supervisor that they could not pursue their proposal to increase production yield because there was no precedent. The employee was guaranteed the highest level of compensation, but they found themselves unable to do the work they wanted to do over the past few years.
One reason for this risk-averse approach may be that Samsung's most senior managers are only provided one-year contracts. If they fail to meet targets within that time, their contracts are not renewed. This puts pressure on managers to focus on generating deliverables quickly rather than spending time on R&D projects.
In contrast, rival chipmaker SK Hynix actively adopts new ideas because it needs to compete with Samsung's dominance. This approach has worked well for SK Hynix in the high-bandwidth memory segment, where it got the lead on Samsung, with the conglomerate now rushing to catch up.
Samsung had set a goal of becoming the global leader in system semiconductors by 2030, but it is nowhere close to achieving that. It is falling behind TSMC, and with Intel establishing a foundry business backed by billions in grants from the US government, it puts further pressure on Samsung. Chinese competitors are also biting at Samsung's heels across all four of its main business segments.
Former Chairman Lee Kun-hee had himself said in 2010 that Samsung's leading products would "disappear in 10 years," highlighting the importance of R&D and the constant need to introduce newer product lines to not just sustain dominance but also further increase it. The sense of urgency that once persisted among the rank and file appears to be missing.
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