The high-profile meeting came on the sidelines of the UAE president’s two-day state visit to Korea. The leaders of other conglomerates – such as Hanwha and CJ – also joined the meeting to boost their business ties.

His visit to Seoul was a reciprocal gesture following President Yoon Suk Yeol’s state visit to the Middle Eastern country in January 2023. During Yoon’s visit, his UAE counterpart surprised the business community by announcing plans for a substantial investment of $30 billion (40.76 trillion won) in Korean firms. At that time, Yoon was accompanied by a business delegation comprising Samsung Electronics Executive Chairman Lee Jae-yong, SK Group Chairman Chey Tae-won, and Hyundai Motor Group Executive Chair Chung Euisun.

Industry officials say that during the closed-door meeting with business tycoons in Korea, the UAE leader explored strategies to enhance business connections in Korea’s cutting-edge technology sectors, particularly semiconductors, as well as in energy domains. However, specific details of the discussions have not been disclosed.

HD Hyundai Vice Chairman Chung Ki-sun expressed optimism about exploring further opportunities with the UAE, particularly in shipbuilding, construction machinery, and eco-friendly energy sectors.

“We are constantly looking for more ways to collaborate with the UAE in those areas, so I will explain our major upsides (during the meeting with the UAE president),” he told reporters before joining the meeting.

Other top executives from major conglomerates echoed similar sentiments. CJ Group Chairman Lee Jay-hyun expressed his intention to engage in discussions regarding bilateral economic and cultural exchanges with the UAE.

Defense industry players – such as Hanwha and LIG Nex1 – are also widely expected to become key beneficiaries of the latest meeting amid lingering geopolitical uncertainties in the Middle East.

On the same day, the Korea Chamber of Commerce and Industry (KCCI) hosted a business investment forum with the UAE, where both parties committed to strengthening partnerships in eco-friendly energy and information and communication technology (ICT) sectors between the two countries.

A group of 200 government officials and ranking businesspeople from both sides exchanged ideas on how to step up their ties in clean energy and telecommunication technologies, thereby leveling up their manufacturing and logistics synergies, according to the KCCI.

Participants included Korea’s Trade Minister Cheong In-kyo and KCCI Executive Vice Chairman Park Il-joon. Minister of State for Foreign Trade of the UAE Thani bin Ahmed Al Zeyoudi also attended the event.

“The UAE is the only country in the Middle East that maintains a special strategic relationship with Korea,” Lee Seung-ryun, head of the economic collaboration division at the KCCI, said. “Both countries will be able to elevate their bilateral collaboration through the latest momentum created during the forum.”

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From a business standpoint, chaebols have a huge influence on the Korean economy because the country’s top four family-controlled entities ― Samsung, SK, Hyundai and LG Group ― account for more than half of the nation’s exports. In fact, these leading chaebol help bring in the majority of Korea’s capital.

While it’s true that there have been numerous controversies, debates, criticism and setbacks regarding their role in Asia’s fourth-largest economy, the point is that consolidating greater market resources to these top-tier industrial conglomerates puts the overall stability of Korea at risk, should they fail.

Samsung, for example, represents more than 20 percent of Korea’s gross domestic product (GDP). The global leader in memory semiconductors, screens and smartphones, Samsung is the largest and most powerful of them all.

However, Samsung’s key businesses are losing their sheen. That doesn’t mean the country’s top chaebol is worrying about its sustainability, but it’s fair to say that the heyday for Samsung’s traditional profit drivers such as TVs, smartphones and memory chips is likely over.

Samsung has admitted that it faces increasingly difficult challenges in terms of accelerating corporate innovation to explore new business areas of growth. While it has set Taiwan’s foundry king TSMC as its chief competitor, analysts say tremendous efforts and continuous large-scale spending are necessary for Samsung to narrow its market gap with the rival in the promising and highly lucrative foundry chip sector.

“Yoon Suk-yeol’s decision to grant a special pardon to Lee Jae-yong, Samsung’s leader, is because the Yoon government wants to increase Samsung’s contributions to the national economy amid rising inflation, interest rates, geopolitical risks and supply chain disruptions. Given the country’s unique chaebol structure, Lee is the only person who can make critical decisions on investments and mergers and acquisitions (M&As). Within that context, Samsung must have a kind of a control tower,” an official at a U.S.-based private equity firm said by telephone.

Some reform advocates claim the country needs to end its decades-long reliance on these big businesses. But the dismay of critics over the Samsung leader’s special pardon isn’t backed by the broader populace, as more than 65 percent supported the pardon, according to various polls. This is a reflection of the expectations of Koreans that Samsung needs to expand and grow during these troubled times, especially with the specter of a potential economic downturn.

No sizable M&As, revival of new nerve center?

Lee’s official signoff is required for many major decisions at Samsung, according to company officials. Samsung sources say that chances are high for Lee to officially take over as group chairman next month at the earliest.

“In Korea, CEOs act more like COOs (chief operating officers) as only owner families have the full authority for crucial decisions regarding a corporation’s path and growth. This has also been very true for Samsung. It’s necessary for Samsung to have a vehicle to help Lee make key decisions such as investments, acquisitions and restructuring,” one insider said.

Despite its 200 trillion won in cash and cash-equivalent holdings as of this month, Samsung hasn’t been very active in making sizable acquisition deals, acquiring only 29 companies including seven in the last five years. A total of four acquisitions involved private equity firms (PEFs). Samsung’s largest-ever acquisition was its purchase of Harman for $8 billion in 2016, one year before it decided to dismantle the “control tower” unit within its structure. For Samsung, acquisitions are a sound way of reaching its growth goals.

In 2017, Samsung disbanded its corporate strategy office as it was the center of criticism for its controversial role in a massive graft scandal that shook the nation at the time. The office had some 250 elite staffers who were hand-picked from the group’s core affiliates before being dismantled. The office had been considered the group’s nerve center. Since then, Samsung’s leadership structure is currently being led by separate task force teams in three group affiliates.

“Discussions are underway for the establishment of a new control tower with a Samsung-established compliance monitoring committee navigating the best possible ways for the conglomerate to better perform the functions of a new nerve tower. Given the vast scope of businesses, the creation of an independent entity assigned to help address group-level affairs is necessary,” another insider said on condition of anonymity citing the sensitivity of the issue.

Representatives at Samsung headquarters in Seoul said they are not in a position to comment on this issue.

The benefits of having a control tower are ensuring end-to-end visibility, reduced costs, increased productivity and implementation of the most effective target strategies. But critics say that because the 2017 decision to disband its corporate strategy office was due to its control over all critical affairs, the new office if created, will likely have reduced responsibilities in terms of defending the interests of the Samsung owner family.

“I would expect an announcement of Samsung’s new nerve center will come after the completion of the specifics of an operations manual by its own compliance monitoring committee. The new control tower will have to highlight its transparency when it comes to the operation as Samsung is set to move forward with more corporate revamp plans,” said Kim Kwang-jin, an analyst at Hanwha Investment.

Lee, who holds the title of vice chairman of Samsung Electronics, is directly involved in discussions with senior members of its compliance monitoring committee, as he is moving towards more board-focused management to improve corporate governance. Lee was a board member at a now-defunct flat-screen joint venture between Samsung and Japan’s Sony, S-LCD, although it remains to be seen whether he will take a role in Samsung Electronics’ board in its annual year-end reshuffle.

Last year, Samsung merged its smartphone and home appliance units to develop a Galaxy-branded ecosystem that goes beyond smartphones and into other consumer electronics, mimicking Apple’s corporate structure.

Analysts said because the key competition point is moving away from devices themselves to developing ecosystems, Samsung has to be quick to address growing investor concerns over the flat growth of its key businesses, as well as its current stale vision for the future.

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“The SK Wuxi plant and Samsung’s Xi’an plant operating in China are classified as subject to case-by-case review, unlike Chinese companies, so there will be no significant disruption to equipment supply,” the ministry said.

In order to minimize the impact of this measure on the Korean industry, the ministry plans to actively participate in the U.S. Department of Commerce’s briefing session and a 60-day opinion-gathering procedure to further express the views of the industry.

The Korea-U.S. export control working group will be held as soon as possible to intensively discuss the difficulties faced by companies, according to ministry officials.

However, the move is expected to complicate the operations of Samsung Electronics and SK hynix in China, as they must undergo a case-by-case review by Washington to sell advanced chips to China.

SK Hynix, which operates a DRAM plant in Wuxi, a post-processing plant in Chongqing, and a NAND plant in Dalian that it acquired from Intel, said it will try its best to secure export permits from the U.S.

“We will work closely with the government to do everything we can to prepare the necessary procedures and documents to secure individual permits from the U.S.,” SK hynix said. “We will work hard to minimize the impact on the domestic semiconductor industry by working with the government to ensure that our Chinese factories can operate without problems.”

Previously, Samsung Electronics’ DS division head, Kyung Kye-hyun, who also leads the company’s U.S.-led semiconductor supply chain consultative body known as Chip 4, said in September, “It is necessary to distinguish between what the government is doing and what companies are do9dding. We are working hard to find a solution.”

“It is fortunate that there is no intention to attack Korean companies, but the government and companies should cooperate well to prevent trade secrets from being leaked during the U.S. licensing process,” an industry official said.

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The ban prevents U.S. firms, or companies using American technology or software, from giving material assistance through trade to Huawei to manufacture its chipsets used in its connected devices. Citing national security risks, Washington also recently blacklisted dozens of China’s tech firms, including its largest chipmaker SMIC.

New sanctions are set to target TCL, one of the leading TV makers in China. U.S. Department of Homeland Security Acting Secretary Chad Wolf recently said his agency reviewed the Chinese TV maker to see whether it had planted security-bypassing backdoors into its TV sets.

“As an example, the DHS is reviewing entities such as the Chinese manufacturer TCL. This year it was discovered that TCL incorporated backdoors into all of its TV sets, exposing users to cyber breaches and data exfiltration,” Wolf added.

Industry officials said that if TCL is restricted from selling TVs in the U.S., Korean TV makers Samsung and LG will benefit from the move. Among the two local TV makers, LG will be specifically able to reap benefits given the company has been fiercely competing with the Chinese firm in terms of global market share.

“Though nothing has been decided yet, LG Electronics’ TV business will likely to be boosted in the U.S. market,” said a local industry official, who declined to be named. According to market researcher Media, LG’s global share came to 11.6 percent in terms of shipments in the third quarter, following Samsung’s 23.6 percent. TCL was the third-largest player with a 10.9 percent share.

Industry analysts forecast LG Electronics will continue to see its share price rise next year as expectations are growing that the world’s No. 2 TV maker will improve its market share in North America.

LG already succeeded in laying out its future vision to investors Wednesday when the company announced it had agreed with Magna International to establish a joint venture for manufacturing electric vehicle (EV) components. LG said the tentatively named LG Magna e-Powertrain would be launched in July 2021, with the company owning a 51 percent share in the $1 billion-invested joint venture. Headquartered in Incheon, west of Seoul, the company will produce motors, inverters, and onboard chargers.

Based in Canada, Magana International is the world’s third-largest vehicle parts supplier. Given the company had been engaged in U.S. tech behemoth Apple’s self-driving EV-making efforts, called Project Titan, shares in LG Electronics soared by its 30 percent daily limit-up that day as investors anticipated the joint venture could potentially provide components to Apple’s EVs. The iPhone maker recently publicly announced that it plans to roll out its first EV in 2024.

Other than the Apple car issue, an industry official here said LG’s future growth could be even higher because its home entertainment division, which supervises the TV business, is expected to benefit from U.S. sanctions on TCL directly.

The North American market is one of the two strong footholds of TCL in terms of TV sales. According to Omdia, TCL’s regional sales in 2020 are expected to account for 31.7 percent of its total and 0.3 percentage points higher than the company would generate from China.

In semiconductors, leading memory chip makers, Samsung and SK Hynix will benefit from Washington’s clampdown on Chinese firms.

Due to Washington’s sanctions, Chinese chipmaker SMIC has been prevented from accessing technology to produce semiconductors at the advanced level of 10 nanometers or smaller.

SK Hynix is also reportedly witnessing increasing orders to manufacture chips based on its 8-inch foundry business. The pandemic has increased demand for image sensors, and power management and display driver integrated circuits.

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