Samsung Rising deepens corruption, chaebols and corporate chaos

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Samsung rising is a new book from journalist and author Geoffrey Cain, and it is the best account of the colossal rise of the Korean conglomerate to power that I have read. Deeply researched and reported, Cain’s book explains how Samsung moved from the vegetable vendor to the global tech titan, with many colorful anecdotes along the way.

If you’ve ever wondered how the infamous Galaxy S II “Dude, you’re a barista” campaign was born, or what went on behind the scenes during the Galaxy Note 7 crisis, or how Samsung executives have managed to survive multiple convictions fraud, here is the book for you. Cain’s writing appropriately blames Samsung’s failures and admires its accomplishments, providing a comprehensive overview of one of the most secret and important businesses in the world.

I met Cain on Skype to discuss the book, the influence of Samsung and the chaebol sequel. Our conversation focused on topics such as how Samsung reacts to crises like the Galaxy Fold and the Note 7, how it is indirectly responsible for the success of Parasite, why the president, who was allegedly incapacitated, Lee Kun-hee is still in charge of the company, and what the heir’s trip to North Korea reveals about the future of corporate culture in South. “Samsung, despite its success, continues to make the same mistakes over and over again,” Cain tells me.

The transcript has been condensed for clarity and length.

I followed your work and I knew that this book had been coming for a while. How was the publishing process? Did you encounter obstacles that delayed it?

I encountered obstacles. Samsung hasn’t really tried to meddle in the publication of the book – they were pretty good at stepping back and informally allowing me to run around and interview people and do my job. The main obstacles were simply the opacity of what it is to be a journalist in Korea. You may have seen it in Japan too. Accessing people can be difficult, and executives and managers do not often interview foreign correspondents often.

In the end, it was just persistence. I had to spend years and years and years researching because there was no Samsung story. It’s not like Apple where you can buy a bunch of books and read the script beforehand. When it comes to a large Asian firm, even in the local language, it is mostly public relations and you don’t really understand the real story when you read a lot of books that have been published in Korean. So yes, it was hard work and it took a long time, and it was delayed several times but I finally got it out. It was an intense editorial process – I think my editor did a really good job of elevating the prose and making it more readable and accessible, and I think that’s what it needed in the end.

Were you able to get the book published in South Korea? The book explains how difficult it is to get critical positions published on Samsung.

Yes, we actually have a Korean publisher called Just Books. I think it’s amazing that they decided to do it, because it’s an independent publisher, it’s not a big publisher, and I assumed many of these publishers didn’t would not be interested. After signing the US deal for the first time, my agent toured Korea and tried to sell it to major Korean publishers, and everyone rejected it. We received 14 refusals, and some of them bluntly said that Samsung was sensitive and that they just couldn’t publish a book like this. And then my Korean publisher Kyung came and saw promises in this area and she was really the champion. I think she’s really happy with the potential she could have in Korea. But there are also big risks, you know, because people are being sued, there are libel suits. You don’t want to be on the wrong side of Samsung, I can assure you.

How did you choose the name Samsung rising? I’ve seen a few first titles floating before, like Republic of Samsung.

So in fact, the title I originally chose was Republic of Samsung and that was my proposal to the editor. And then we changed the title several times because we couldn’t really find a title that captured the full swing of what the book was supposed to be. Republic of Samsung, I think it sums up the Korean side of the story – how Korea is this republic of Samsung and Samsung has contributed to so many aspects of life in Korea, and Koreans call their country the republic of Samsung. But then we thought it might be a little too focused on Korea, and there were a lot of global elements in the book.

So another title we went to was The Battle of Silicon Valley, and it’s a title that captures the war between Apple and Samsung. And that’s the kind of thing that I think would appeal to a lot of techies and nerds, you know, who are based in San Francisco and want to know the story of this great battle for smartphones. Everyone read something about it somewhere or they saw it in the news, and they use their iPhones or their Samsung, but there has never really been a full written account of how this war really took place from the inside. But the problem with The Battle of Silicon Valley was that it didn’t really resonate with the fact that it was an Asian dynasty competing with these big global multinationals. Finally, we settled Samsung rising because, you know, there’s Samsung in the title – so it’s the Asian business dynasty there – but it captures the momentum of this little grocery store selling fish and pulses in the 1930s which, through this very troubled history and a very harsh series of wars and scandals of corruption and political battles, emerges to become the largest technological conglomerate in the world.

Photo by Amelia Holowaty Krales / The Verge

The book traces Samsung from the days when its founding figures turned to Japanese companies as a model, then finally stood up and defeated Sony. And it was striking to hear about the cultural reverence at the time for Japanese companies. Do you think there is anything like that in today’s Samsung or has success made them more insular and focused on their own way of doing things?

So I think the big story of their successes over the past decade is the smartphone. The Galaxy represented a huge and massive slice of revenue for the entire Samsung group. I think that has been their goal for a long time. They knew they were from this poor, dusty Korean colony. and for a long time, they knew that they mainly borrowed the practices of Japanese companies. I mean, Samsung has long been basically like a Japanese company. In Japan, you have wartime zaibatsu, and Samsung was basically modeled after this idea of ​​this God-like entrepreneur who has this top-down vision that he conveys to all executives. And that’s what allowed them to make all of this rapid progress, that they did what they did without asking questions. They did it for the glory of Korea.

Their idea was to make Samsung a manufacturer of third-rate components, semiconductors and microwaves so that they put the GE logo on a manufacturer of high-end smartphones that could compete with Apple and compete with Sony. And it is not an easy task, but they did it because of their militaristic culture. But I think it’s very clear to a lot of people that there’s not really any other smartphone success in the pipeline. It’s no longer really about being a consumer-oriented brand. I think they will make more components. They announced a big boost in these NAND memory semiconductors, creating chips for future artificial intelligence systems that are going to need powerful chips. And also QLED, quantum LED – they recently stopped making LCD screens. They are entering a phase where I think they are innovating more on the component side and going to do technological work behind the scenes, not so much out there in front of the audience.

This is also what happened to Sony.

Yeah, I think so. It’s worrisome because that’s what China is doing. China is quickly catching up. And perhaps the only saving grace right now is that the world is waging a trade war with China, or at least with the West. And as a result, Samsung will face slightly less competition from them. But I think Samsung had seen its climax with marketing, with software, trying to compete with Apple and make their own version of the iPhone. They gave up on the idea that “we are a manufacturing giant, we are an engineering company. We are not the cool kids of Silicon Valley. But how do you differentiate yourself from Huawei or another Chinese company? I mean, in five years if there is no cataclysm in the meantime, then Huawei, Xiaomi, Lenovo, these companies will have huge leverage on many of the same industries as Samsung.

The book explains how Samsung has really forged a technical advantage over Apple in some ways, like having big OLED screens in Galaxy phones, etc. But these days, you hear more about Chinese companies. As if you were looking at the new Galaxy S20, its main features are things you could have gotten from Huawei or Oppo or Xiaomi last year. And it affects their market share in India and everywhere else. Another thing that you address is the difficulties with software disputes with Google on TouchWiz and trying to make Milk Music a success. Is there a way for Samsung to tell this story as a consumer brand in the future?

I think there is some kind of promise, but the problem is that it is not yet completely clear what this consumer brand will be. So in the past, it was Galaxy. You know, it was “The Next Big Thing”, a marketing campaign that I covered in the book. It was Milk Music, it was the attempt to make Tizen OS. A lot of these things, Samsung was doing and they were doing a good job for a while, then they pulled out because the current headquarters didn’t really trust or appreciate the work that the marketing and software offices did foreign offices were doing. They thought they should have control over it, which was a big mistake.

This speaks to the Korean chaebol culture of not trusting strangers at work, of trying to control pretty much everything you can from the headquarters itself. The problem with Samsung’s consumer brand does not come from the products themselves. The deepest problem comes from corporate culture – the reluctance to really do something big and new. I mean, I think most of the innovations we see from Korean companies are just incremental innovations. They are essentially building what the leaders have done. They tinker with improvements here and there, you know, a new processor or a new OLED screen or a new curved screen. But they don’t really make the far-reaching product that will change things like what the iPhone did in 2007.

But I think, to be fair, it’s not just Samsung’s problem. I think a lot of the industry is facing this problem because it’s been a long time since we’ve had just one big technology outage. The iPhone, the smartphone, followed by social media and the expansion of Twitter and Facebook, these are really the big disturbances of the last decade that have reshaped a lot the way we perceive the world and how we get our news and how we manage our lives and do business. But it’s been a while and we don’t really know what the next big disruption is. You know, people say AI, facial recognition technologies, biotechnology. There are all these great technological movements to come. So Samsung’s problem is that they’ve been heavily invested in many of these areas that are supposed to disrupt technology, but they have not progressed in their development. Samsung was in biotechnology with a company called Samsung BioLogics. They decided to make incremental innovations in health care. And this company had problems with fraudulent accounting, and its actions were overwritten because of some of the fraudulent accounting that had occurred in this enterprise. And there was destruction of evidence when prosecutors attempted to investigate.

The other problem is artificial intelligence. Samsung has developed software called Bixby which is supposed to be like the Google Assistant. They want to have their own AI system capable of powering all of their hardware, but they have failed to turn that into something as big as what Google or Amazon are doing. AI is a front-end technology – in the future, it will relieve the mental burden of humans and AI systems will manage much of what we do for us. It will change a lot the way we live our lives. But Samsung is behind in this area. They’re heavily invested in AI-driven semiconductors, which is a good position. But again, this poses the problem of knowing when China will enter this file? China has its own industry. Over the past decade, China has made huge strides in AI, especially software, with WeChat. The data they collect about their citizens allows AI to work well. And they also manufacture semiconductors. So basically China can do what Korea can do, and that’s Korea’s problem now.

There will be a disruption, then Samsung and other Korean companies will do what they have done in the past and they will catch up. You know, they’re going to see the disturbance. It might take them a little while to figure out what’s going on. But once they see it, they will go into run mode and they will follow and they will imitate. They will do what they can to make sure they can catch up with someone in this area when the disruption occurs.

Photo by James Bareham / The Verge

One question I still have after reading the book is how exactly Samsung was able to recover Fire crisis on the Galaxy Note 7. You go into this story in detail, but later you actually quote the Edge note 8 review where Dan said it was even better than 7, which was critical consensus at the time. But I always thought that if there was something that would make a mark in the minds of consumers, that would be it. Do you remember when there were anti-Galaxy Note warning signs at every check-in counter at every airport in the world, etc.? What does he say about Samsung that they were able to cross this saga?

Yeah, good question. I think it shows that Samsung is just such a massive and resilient company. The Note 7 fires were devastating for them. But Samsung is a company that thrives in crisis. I mean, Samsung has gone through corruption scandals and sex scandals and political crises and defective products and their leaders have been brought to justice and justice for all kinds of embezzlement, tax evasion charges, cowardly stock sales, financial mismanagement and destruction of evidence. Samsung is a company that has simply proven itself, but which manages to survive intact. It’s just their system. Their system is designed to support disasters and curb crises and find ways to cope. And then pass very quickly.

And I think with the Note 7 fires, yes, totally devastating. I mean, billions of dollars probably in losses because of this. And it was a major danger to public safety. But one of the most amazing things about this business is how it can do it. Because they had so many product lines, they do so many things. Yes, it’s terrible if the Galaxy brand starts to deflate. But they’re going to make a lot of money with semiconductors in the future or with screens. And they can invest these profits in another promising new area. They have this ability to use different industries to their advantage. And that’s why when the Note 7 fires happened and Jay Lee, their leader, was arrested, their profits hit record highs. It also pushed the South Korean stock market to record levels.

The other factor here is that consumers quickly forget and move on. There was a lot of brand damage at the time. But I think if you ask the average person about these Note 7 fires, I think they will vaguely remember it and say, “Oh yeah, I remember when it happened, and it was Samsung , no? But I no longer think they are making decisions on this basis. I haven’t met many people who are actively thinking about these fires a few years ago. Just to give a parallel, there is the famous reminder of Tylenol from the early 1980s when Tylenol poisoned and ended up killing a number of people [as a result of drug tampering]. It could have destroyed Tylenol, and it would have been the end of Tylenol as a brand. But people go on and forget.

So even though I don’t think Samsung has ever really addressed the main problem, which is management culture, I think they were able to fix it and move forward in a way that made everyone forget because ‘they produced so many products, they produced so many things. They just have ways to bounce back.

Well, the difference with Tylenol is, was it not some kind of model of transparency and anticipating the problem of response? While Samsung denies that the problem exists and then says it has been fixed, the replacement units also catch fire. So I was a little surprised that people forgot. I may be too close to the whole situation.

Yeah. When I was writing the book, I didn’t forget it and it was fresh in my mind all the time. Samsung even attacked me during this time. They didn’t want me to write about it, they were unhappy with what I said about them. I remember sitting there when these attacks were directed at me, thinking, “Isn’t this company worried about its reputation? I mean, they had these exploding phones and they’re busy writing letters to me, trying to discredit a reporter covering them. Don’t they have more important things to worry about? I’m just a little guy here on my smartphone writing emails to people, and they’re trying to shut me up and shut me up like I pose a major threat to their brand. You know, the phones are the threat. Obviously your phones are exploding that you should worry about.

I was also surprised that people are moving fast. But you’re right about Tylenol, it was a good example of success, when Samsung sort of made the process worse. But no matter what the success or the failure, you know, I just think people tend to forget. And that’s what I’ve seen over time. I mean, the Galaxy they released right after that didn’t work so well, but it still opened up some good reviews.

Do you think this bodes well for future Samsung folding phones given What happened with the Galaxy Fold?

Yes, it was a pretty disastrous deployment, this first. DJ Koh, who was the CEO at the time, officially said that he had thrown him into the market. It’s similar to what happened with the Galaxy Note 7. The difference with the Note 7 is that, you know, they threw it into the full market, while the Galaxy Fold just went to the reviewers, fortunately. It would have been a disaster if it had affected everyone. I think that if the Note 7 fires never happened, these reports could happen and they could send the Fold anyway, because that is what happened with the Note 7. Many executives refused that could happen and they told their employees not to talk about it. “Don’t worry about it, we’ll suppress this information. “

I had a lot of sources at Samsung who told me about the rushed work that was done first [Galaxy Fold]. They had planned it for almost a decade, which is incredible. They knew about this technology well in advance, and they had done a lot of very careful work, but the pressure was mounting because the smartphone market was maturing and Samsung thought it needed some sort of cool new thing or a minor disruption to designing phones. And finally, they said, look, we’ve been working on this for 10 years. We have gone through so many designs and patents, and none of them have really worked yet, but we just have to get it out. They rushed it, it didn’t work, and it was a disaster because they had to call it back.

I think with the new phones, I’m sure they’ve now fixed the hardware issues. Personally, I have not tried the new Galaxy foldable phones but I think the problem is that it is still an incremental hardware innovation. I think internally, Samsung executives know that it only takes a few years before it turns into something else and before everyone can do it for a fairly cheap price. I don’t think these will have a long life ahead of them.

If you look at the history of phones, there was a day before smartphones where you could buy the foldable phone or buy the candybar phone or buy the snap-up phone. There were all these different designs back then that were super cheap and super easy to use. And I think that’s what’s going on with smartphones. I think the technology has gotten so good and it has matured so much that eventually it will just look like you can get the foldable or get the snap-up or get the normal display. And all of this will end up being cheap. I don’t think the hardware will be the future of what defines a smartphone.

Another thing that you write about in the book is the cultural power of Korea, and obviously it has peaked recently with Parasite. I was wondering if you had something to say about this, if there was time to put it in the book when it happened? Miky Lee of CJ Group was on stage to receive this Oscar and she is a central figure in a few chapters. Do you think you can draw a line from Samsung’s success at things like Parasite and the growing importance of Korean pop culture in the world?

Yes, in fact, I wrote an article about it a few months ago in Foreign policeand I used a lot of material from the Samsung book. You could draw a line, yes. So Miky Lee, who is the producer of Parasite, she was the heir to the founding family of Samsung. She is an American citizen and has always been a little fanatic of cinema and fanatic of culture. She taught Korean at Harvard when she was a graduate student. And she lamented the fact that, you know, Korea was just considered to be such an insignificant place that why would anyone care? And it actually set itself the goal of transforming Korea into this cultural power. She played an important role in the Korean wave and spread awareness of Korean cinema, Korean culture, K-pop music, all of that.

It really started in the 1990s, after the death of the founder of Samsung. There was this inheritance process and each child inherited one of the five arms of this Samsung empire. And his family line inherited from Cheil Jedang, CJ, who was a food supplier at the time, just cheap candy and all that. She knew she wanted to get into film and culture, and her uncle, who is the president of Samsung [Lee Kun-hee], was negotiating with DreamWorks to obtain full participation. He wanted to buy DreamWorks and make it part of Samsung. And his goal, if I understood what Samsung executives told me, was that he basically wanted to put Steven Spielberg under his control as director. Of course, in Hollywood, this is a ridiculous idea. No respectable director will let a semiconductor company like Samsung take over and tell you how to make your movies.

Spielberg therefore rejected the president of Samsung, but the woman who negotiated this was his niece Miky Lee, who was the vice president of CJ. And Spielberg and his team were really impressed with it. They already knew her. And they decided to go back and offer her a $ 300 million stake, which, yes, she would be a smaller investor, she got about 10% of the capital, but she used her alliance with DreamWorks to transform CJ from this unimportant confectionery supplier to real cinematic power. It didn’t happen right away, but this partnership gave him access to talent. You know, its filmmakers could learn from DreamWorks. It had distribution rights in Asia. And it was by using this connection and these Hollywood networks that allowed him to promote Korea and bring films like Parasite in the foreground. And before Parasite there was Old boy and Common safety zone and Snowpiercer. There is a long line of Korean films that have been very well received so far that have been produced by Miky Lee and produced by CJ.

So yes, I think that shows how influential the founding family of Samsung is. In the world of Korea and the spread of Korean culture, I think it’s amazing how they affect all facets of this nation. And they’re so responsible for bringing it into the world, whether it’s a smartphone or Parasite or something else. Samsung touches everything when it comes to the Korea of ​​the world.

How do you see this Chaebol culture in the future? It has always seemed in the past to be this kind of irremovable object, but the consequences for Jay Y. Lee and in particular [former president] Park Geun-hye was serious and now [current president] Moon Jae-in wants to be seen as a reformer. How do you think it will move in the future and how could it affect Samsung?

Yes, I have thought about it a lot. So I think when I was writing the book, I always felt like the Chaebol culture and the Samsung culture were about to change. I felt like I was writing about a pregnant woman who was going to bring the baby out and you know, life is going to be different for them. But as I got deeper, especially in the story, I realized how ingrained the model is and how history keeps repeating itself and how Samsung, despite its success, continues to do the same mistakes over and over and over.

So far, all Samsung executives have entered and left the courtroom. They have been either accused, sentenced or imprisoned for tax evasion, corruption, embezzlement or perjury. I mean, these are serious crimes and serious charges against Samsung’s top officials, who are the most powerful people in Korea and some of the most powerful people in technology, despite their ignorance. Now, Jay Lee, he’s awaiting his final trial. Il a passé un an en prison et a été libéré avec sursis. Le juge a confirmé une partie de son accusation de corruption mais a réduit le montant des pots-de-vin qu’il était accusé d’avoir. Et son verdict doit être rendu prochainement. Mais plus je regarde ça, plus je commence à devenir cynique et je pense qu’il pourrait en fait être relâché d’une manière ou d’une autre. Peut-être qu’il sera renvoyé en prison ou qu’il recevra une peine avec sursis. Mais j’ai le sentiment que les choses s’alignent pour que ça lui soit facile et qu’il revienne au service de son entreprise et de son pays – c’est essentiellement ainsi que le gouvernement le voit.

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