Samsung's Lee to be released on parole on Aug. 13

Samsung Group leader Jay Y. Lee will be released on parole on Friday after having been imprisoned since January of this year on charges of bribery and embezzlement, which involved the impeachment of former president Park Geun-hye in 2017. 

The Ministry of Justice's nine-member Parole Commission on Monday approved his release after four and a half hours of heated discussion. Justice Minister Park Beom-kye endorsed the decision.

Lee's parole will just precede the nation's Independence Day on Aug. 15, at a time when the world's largest smartphone and memory chip maker is fighting an uphill battle with global competitors in the absence of its top leadership. 

“Among the 1,057 inmates eligible for parole, we approved the release of 810 people. Lee is included on the list of parolees,” Park told reporters in a media briefing. "We took into consideration the prolonged pandemic situation and the changing global economic conditions." 

Lee, vice chairman of Samsung Electronics Co., has been serving his remaining prison term since this January when his two-and-a-half-year prison sentence on bribery and embezzlement charges was finalized. 

Lee was supposed to be released in July of next year, but was eligible for parole after completing 60% of his prison term. On Aug. 13 at 10 a.m., he will be released from the Seoul Detention Center.

But Lee's parole, instead of a pardon, means he will be unable to return to Samsung management until the second half of 2027 given a law governing special economic crimes. Further, he will be placed on probation after being released, which will restrict his overseas business trips. 

FOUNDRY MARKET

His parole comes two weeks after Intel Corp. Chief Executive Pat Gelsinger announced its roadmap to become the world’s top foundry player by 2025 by investing heavily in that business. Gelsinger said the company has already secured Qualcomm Inc. and other semiconductor companies as its clients.

In the foundry market, Samsung is struggling to narrow its gap with sector leader Taiwan Semiconductor Manufacturing Co. (TSMC), entering a heated race for the 3-nanometer process node, the industry’s narrowest circuitry.

The Taiwanese company last year disclosed plans for a $12 billion chip plant in Arizona, which is expected to come online in 2024. It is now looking to build its first chip plant in Europe in Germany.

In March of this year, Intel, the US largest manufacturer of microprocessors, unveiled its $20 billion spending plan to build two new chip factories in Arizona to jump into the foundry field.

Two months later, Samsung followed suit with the announcement of a much-touted $17 billion investment plan to build a foundry factory in America.

"In the absence of its top manager, Samsung has not made any important strategic decisions yet," said a senior official of a local industry lobby group. "After his release, Samsung will push ahead with key investments and M&As."

Since clinching an $8 billion takeover of Harman, a US electronics systems maker for automobiles, in 2017, Samsung has not returned to the global M&A market. Lee previously served a year between 2017 and 2018 in relation to the bribery and embezzlement charges.

RISE OF XIAOMI

Samsung is also on the brink of losing its No. 1 position in the global smartphone market. In June of this year, China's Xiaomi Inc. overtook Samsung for the first time, quickly penetrating into the budget phone market in China, India and Europe. 

Xiaomi took a 17.1% share in global smartphone sales in June, followed by Samsung with a 15.7% share. In the second quarter, the Chinese phone maker has already outstripped Apple Inc. to claim the No. 2 spot, aiming to become the world's top smartphone maker by 2023.

South Korea's two leading business lobby groups, including the Federation of Korean Industries, hailed the justice ministry's approval for Lee's parole as a decision to help the country fortify its global leadership in the semiconductor market.

"But given the restrictions imposed on parolees related to employment and overseas business trips, many considerations need to be taken to assist in Lee's administrative tasks," the Korea Enterprises Federation said in a statement.

On the question of why Lee wasn't issued a pardon, a presidential Blue House source said they did not have enough time to discuss it. Market speculation is that President Moon Jae-in could grant a special pardon to the Samsung leader around the end of this year, after reviewing his business performance. 

Write to Hyo-joo Ahn and Hyung-suk Song at joo@hankyung.com
Yeonhee Kim edited this article.