What Lee Jae-yong Could Learn from Sony and Taiwan: Samsung’s Slowdown Isn’t Just About Chips—It’s About Structure

I was recently invited to give a lecture in South Korea. While my local colleagues showed great interest in TSMC’s competitive strength, what they were most concerned about was how Samsung Electronics could break through its current stagnation. One Korean professor even asked me: if I had the chance to meet Samsung’s chairman, Lee Jae-yong, what advice would I give him?

I offered two key suggestions. First, I believe Samsung’s business structure is too large and overly complex, and it must be streamlined. Second, I pointed out that South Korea’s industrial system is fundamentally different from Taiwan’s, making it difficult to simply emulate Taiwan’s approach. Instead, Sony in Japan, which is now working on restructuring its business units, may offer a more relevant model.

In fact, compared to its competitors, Samsung Electronics Group is far too complex. It operates across a wide range of sectors—from semiconductors to smartphones and televisions—and each business unit is vertically integrated. This structure creates differing interests and strategic directions across departments, inevitably leading to internal conflicts.

For any company, time is the most valuable resource for its chairman or CEO. If that time is spent constantly appeasing and coordinating between departments, how can the business move forward efficiently? If Lee Jae-yong is serious about reforming Samsung, he must begin by simplifying the organization.

I also explained that Taiwan may not be the best model for Samsung to follow, as the industrial structures of Taiwan and South Korea are fundamentally different. Taiwan has long adopted a vertically specialized model, where each company typically focuses on a single segment of the supply chain. In contrast, large corporate groups in Korea and Japan span multiple sectors. Therefore, the strategies of high-performing Japanese companies may offer more relevant lessons for Samsung.

Sony’s Separation Strategy: Entertainment at the Core, Semiconductors Set Free

I’ve been paying close attention to recent developments at Sony in Japan. As a globally recognized company, Sony is now planning to spin off certain business units, including its financial and semiconductor divisions. This presents a reform direction that Samsung Electronics would do well to examine closely.

At the end of May, Sony announced that it would spin off its financial operations, including banking and insurance, to form a new entity called Sony Financial Group. The company plans to distribute 80% of the shares to existing shareholders, with the spinoff and public listing expected to be completed by the end of September. Going forward, Sony’s core business will focus on entertainment segments such as film, music, and gaming.

As for Sony’s semiconductor business, it is currently operated by Sony Semiconductor Solutions (SSS), which focuses primarily on image sensors (CIS). While a specific timeline for a spinoff has not yet been announced, internal planning is reportedly underway.

Sony’s image sensor (CIS) business currently holds over 50% of the global market share, making SSS Japan’s largest contributor in terms of semiconductor revenue on the global stage. The second and third largest players in the CIS industry are South Korea’s Samsung and OmniVision (OV), which was acquired by China’s Will Semiconductor Group.

In my view, Sony’s series of spinoff plans represent a step in the right direction for corporate reform. Compared to its entertainment division—which now accounts for over 60% of its revenue—the financial and semiconductor sectors are vastly different in nature. Their business models, required talent, and customer bases have little in common. Keeping them bundled under one roof makes it difficult to generate any meaningful synergy.

By spinning off its financial and semiconductor divisions, Sony can sharpen its focus on core operations and accelerate its transformation into a global entertainment powerhouse. Its main sources of profit will increasingly come from gaming, music, and film.

Sony’s decision to consider spinning off SSS also reflects key strategic considerations. While the company currently holds a strong market share in CIS products, this is largely due to its exclusive supply relationship with Apple. In contrast, Sony lacks a clear competitive edge in China’s smartphone market and the emerging electric vehicle sector.

Moreover, the semiconductor business is highly capital-intensive. Sony is now a shareholder in TSMC’s Kumamoto plant, securing access to advanced foundry capabilities. To maintain its lead in product design, the company will require continued large-scale investment. Spinning off SSS would allow for more flexible fundraising and capacity expansion.

In my view, the most significant benefit of spinning off SSS is to enhance Sony’s ability to respond to market shifts and mounting competitive pressure. With global smartphone demand slowing, the U.S.–China tech war intensifying, and Chinese semiconductor firms rising rapidly, giving SSS the flexibility and autonomy to adapt has become more critical than ever.

Weighed Down by Complexity: Why Can’t Samsung Accelerate?

Of course, every company faces its own unique circumstances, and Samsung Electronics is significantly larger and more complex than Sony. Even within its semiconductor division alone, Samsung operates across memory, foundry, and logic ICs—each with distinct product characteristics, business focuses, and customer bases. Housing all of these under one corporate umbrella has clearly increased managerial complexity. When Samsung was at its peak, internal frictions may have been manageable, but now that the company is in decline, the challenges ahead will only intensify.

On July 2, 2025, Samsung announced a major setback in its advanced process roadmap, underscoring once again the structural challenges the conglomerate faces amid mounting internal and external pressures.

According to South Korean media reports, Samsung’s foundry division has officially postponed its 1.4 nm process node—originally scheduled for mass production in 2027—to sometime after 2029. At the same time, the company is shifting its focus to stabilizing the yield of its 2 nm process and improving the operational efficiency of its mature nodes, including 4 nm, 5 nm, and 8 nm.

This strategic shift signals that Samsung is no longer racing to claim the “technological leadership” position against TSMC at all costs. Instead, it is opting for a more financially sustainable and production-focused approach. However, it also reflects a deeper reality: when a company’s internal structure is overly complex and its resources spread too thin, staying ahead in an increasingly fierce technology race inevitably comes with delays and compromises.

The complexity of Samsung’s business and organizational structure has already begun to seriously affect its operational performance. More critically, it has eroded customer trust—a loss that is particularly damaging in today’s hyper-competitive and uncertain environment, where trust is one of the most valuable assets a company can possess.

In fact, the strategy of spinning off overly complex business units to enhance competitiveness was already being implemented in Taiwan as early as the 1990s. As I’ve often noted, UMC underwent a spin-off in 1996, Acer restructured its group in 2001, and ASUS split its operations in 2005. Taiwan’s electronics industry recognized early on that the “one big pot” model—where all units are lumped together—was unsustainable. These reform experiences have become invaluable assets for Taiwan’s industrial development.

Through specialization and division of labor, each business unit gains clearer strategic focus, while smaller, more agile organizations motivate employees with a stronger sense of achievement and ownership—encouraging them to fight for new ventures. This was a core formula behind Taiwan’s past successes. Allowing entrepreneurial spirit to flourish is the essence of Taiwan’s electronics and semiconductor industries. Today, Japan and South Korea are starting to reflect on whether to adopt a similar path, though their awakening may have come a step too late.

A Korean journalist friend once told me that while reading the Korean edition of The Light of Chip Island, one line stood out to him: “Taiwan is everyone’s friend; Samsung is everyone’s enemy.” He said he deeply agreed with that statement. Perhaps, if I ever do get the chance to meet Lee Jae-yong, that’s exactly the line I’ll offer him.