A key figure will be released from prison this month? The pattern of the global chip industry may be affected.

A man who could influence the global chip industry will be released from prison this month.

Lee Jae-yong, vice chairman of Samsung Electronics, who has been jailed for the political case of a close confidant, is expected to be paroled or pardoned on Restoration Day on August 15, according to reports.

This is important news not only for Samsung Electronics, but also for the global chip industry. Because once Lee Jae-yong is released from prison, he is expected to finalize Samsung's key decision to invest heavily in a chip plant in the United States, and it is also possible to agree to a series of decisions such as Samsung Electronics's acquisition of NXP Semiconductor and Samsung SDI's investment in the production of electric car batteries in the United States, either of which is a blockbuster for the industry.

There is an urgent need for Li Zairou to make a decision on Samsung's key investment decisions.

For Samsung, the impact of Lee Jae-yong's imprisonment leading to a vacancy at the helm at the top of the company may be greater than it seems.

Although Samsung Electronics ranked as the leader in the semiconductor industry with revenue of $19.7 billion in the second quarter, slightly surpassing Intel's $19.6 billion in revenue, it may be difficult to keep the position if it does not act.

At a time when there is a serious shortage of chips in the world, the major chip giants have laid out or are investing in factories around the world, and Samsung's two biggest competitors in the chip industry, TSMC and Intel, are no exception.

On the one hand, TSMC is building a 5nm chip plant in Arizona and expanding its factory in Nanjing, while it is considering building factories in Germany, Japan and other overseas regions.

On the other hand, Intel has announced that it will re-enter the contract manufacturing market, chasing Samsung in terms of production capacity, and has invested tens of billions of dollars in large fabs in the United States and Europe, which is expected to start production as early as 2023. And has signed big customers such as Qualcomm and Amazon.

Compared with its competitors, Samsung is clearly slow to move. Although Samsung executives have visited the US in recent days and are considering investing 17 billion dollars in a new chip plant in Texas, New York or Arizona, this key decision has not been finalized because Mr Lee is still in prison.

A source said that Samsung Group executives collectively believe that investment decisions in the United States can only be finalized after the return of Lee Jae-yong.

Lee Jae-yong is expected to be released from prison

In 2017, Lee Jae-yong was charged with involvement in a scandal involving former South Korean President Park Geun-hye over "cronies meddling in politics". In the first trial, Lee Jae-yong was sentenced to five years in prison with a four-year reprieve, and he served a year in prison. In 2019, South Korea's Supreme Court sent the case back for retrial. On January 18 this year, the Seoul High Court of South Korea sentenced Lee Jae-yong to two years and six months in prison in the second trial, and he was arrested in court.

So far, Lee Jae-yong has served 18 months in prison, reaching 60% of his 30-month sentence, which meets the parole requirements of South Korea's Ministry of Justice. According to Samsung sources, the Samsung Group very much hopes that Lee Jae-yong will be released on parole on South Korea's Restoration Day on August 15.

In June, Kim Chi-nam, president of Samsung's semiconductor business, even made a rare direct appeal to South Korean President Moon Jae-in to agree to Lee Jae-yong's parole. He said that "only in the presence of the vice president can the company make major decisions on semiconductor investment quickly," which is vital to South Korea's economic lifeline.

Given the importance of the Samsung Group to the South Korean economy and concerns among South Korean politicians that Samsung is lagging behind in global competition, more and more politicians support Mr Lee's release from prison.

At the same time, although some people in South Korea have protested against the parole of Lee Jae-yong, South Korean opinion polls show that nearly 70% of the people also agree to let Lee Jae-yong be released.

South Korea's judiciary is reviewing the possibility of Mr Lee's parole, while the president's office may be considering granting an amnesty rather than parole, as parole would restrict Mr Lee's business activities, Yonhap news agency reported.

May consider resuming acquisition activities

Although Samsung's day-to-day operations have not been affected much during the years when Mr Lee was in judicial trouble, its long-term strategic development and acquisitions have stalled.

Samsung has accumulated nearly $100 billion in cash reserves on its books since 2016, while the company has not made any major acquisitions in recent years.

Cui Yunhao, Samsung's chief financial officer, said at a results conference at the start of the year that Samsung's growing cash reserves were mainly due to Samsung's "inability to carry out meaningful M & An activities".

"in fact, high-risk strategic decisions such as mergers and acquisitions and multibillion-dollar deals are left to Samsung owners," explains jae-yong Song), a professor at Seoul National University in South Korea. Samsung's chief executive, (CEO), is more like (COO), chief operating officer, in a way. They are only responsible for short-term profits. Only the owners of the company can determine the long-term direction of the company, because their tenure is lifelong. "

In addition to the decision to build a chip plant in the US, Mr Lee may also agree to buy stakes in companies such as Dutch car chipmaker NXP Semiconductor, which is a potential target for Samsung, analysts said. NXP Semiconductor, with a market capitalization of about $58 billion, is considered by a number of analysts to be well suited to Samsung's strategic needs.

In addition, Samsung SDI is considering investing at least $3.5 billion in producing electric car batteries in the US, although sources say a decision on battery production is unlikely until Mr Lee makes a decision on a chip factory.