Behind the scenes at Samsung, as it posts record profits while being embroiled in a corruption scandal, a year after the exploding Galaxy Note7 debacle
Bloomberg : Tweets: @samkimasia , @jchengwsj , @business , @markgurman , and @jchengwsj . Thanks: @pelstrom Tweets: @samkimasia : “If you don't like Samsung, go to North Korea!” “Free Jay Y. Lee!” Mayhem unfolded when activists protested Samsung. http://www.bloomberg.com/... http://twitter.com/... Jonathan Cheng / @jchengwsj : “For the moment, the chaebol is like a headless octopus, its tentacles thrashing about without coordination.” http://www.bloomberg.com/... @business : Our new @BW cover: Samsung is deep in the mess that brought down South Korea's president. How is it still thriving? http://www.bloomberg.com/... http://twitter.com/... Mark Gurman / @markgurman : A story only they could have written: @BradStone @samkimasia @ianmking's incredible story on Samsung. Learned a ton. http://www.bloomberg.com/... Jonathan Cheng / @jchengwsj : A propos of its mega-quarter, a Bloomberg deep-dive cover story on Samsung's insane year. @BradStone @samkimasia http://www.bloomberg.com/... Thanks: @pelstrom
Context & Ripple Effects
The road here was brutal: after Galaxy Note 7 shipments were halted over battery failures, hundreds of class-action lawsuits followed and Vice Chairman Jay Y. Lee took heat from investment groups (per Bloomberg's October 2016 coverage). Then the corruption scandal entangled Samsung in the investigation that helped bring down South Korea's president.
Against that backdrop, this quarter's numbers are striking: a record $9.9B net profit, up 89% YoY, powered by chips and the Galaxy S8 rather than any resolution of the legal mess. Jonathan Cheng's 'headless octopus' framing captures the tension — an operating machine still executing at full speed while its de facto leader sits in detention and protesters chant 'Free Jay Y. Lee' outside.
First-order effects
- Samsung's semiconductor division is carrying the P&L outright — record profit arrives despite, not because of, stable leadership, with the mobile business recovering on the Galaxy S8 after the Note7 write-off.
- Jay Y. Lee's detention leaves the chaebol steering itself through professional management, while activists turn every public appearance into a governance spectacle.
Second-order effects
- The profit mix hardens around memory chips, which sets up the pattern confirmed a year later when Samsung posted a $14.4B quarter on chip demand but warned of stagnant flagship-phone sales — devices become the cyclical laggard, silicon the engine.
- Investment groups that pushed back during the Note7 fallout gain leverage: record earnings without a convicted-succession plan strengthens the case for governance reform at the chaebol.
Third-order effects
- Samsung's earnings decouple from both its brand crises and its founding family's legal fate — but the same dependence cuts both ways, as the rare 2024 apology for disappointing results showed once the memory cycle turned against it.
- If the pattern holds, Korean chaebol governance becomes the binding constraint: operational excellence can outrun a leadership vacuum for years, but succession and scandal eventually price into strategy, as the challenges facing Lee Jae-yong as executive chairman make plain.
The trend: Samsung's fortunes are riding the semiconductor cycle rather than its device brand or its controlling family's standing — a structural shift from consumer-hardware champion to memory-chip cash machine run by professional managers.