Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Samsung Board Pivoted from Phones to Chips
Transcript
- Lucas: If you had asked someone in 2015 what Samsung is, they would have said a phone company. The Galaxy S series was everywhere. But look at Samsung today — mid-2026 — and the engine of the business is not phones. It's chips. Luna: And that didn't happen by accident. The board had to steer a massive ship away from consumer electronics toward semiconductors. That is a bet with trillions of won on the line. Lucas: Exactly. The pivot really crystallized in 2019. That's when Samsung announced a $116 billion investment plan to become the world's leader in non-memory chips, specifically logic chips and foundry services. For context, that is more than the GDP of some countries. Luna: And this was not a popular decision at the time. Shareholders were used to steady dividends from the mobile division. The board had to sell them on a long-term vision. Lucas: Right. The board's composition was changing too. Historically, Samsung's board was stacked with family allies and executives from within the chaebol. But after a 2018 shareholder activism campaign from an American hedge fund called Elliott Management, Samsung agreed to add more independent directors and separate the chairman and CEO roles. Luna: Elliott pushed for a holding company structure and higher dividends. The board compromised. They kept the structure but committed to returning 50 percent of free cash flow to shareholders. That gave them the cover to pursue the chip investment. Lucas: So the board threaded the needle — they satisfied short-term demands while betting on a capital-intensive long-term strategy. The key figure here is Vice Chairman Lee Jae-yong. He had been de facto leader since his father's heart attack in 2014, and he was the one driving the chip focus. Luna: But Lee was also embroiled in a bribery scandal. He served time, got paroled. That instability could have paralyzed the board. How did they keep strategic momentum? Lucas: That is the fascinating part. The board empowered a professional management team — people like Kim Ki-nam, the head of the semiconductor division. They insulated operational decisions from the legal uncertainty around Lee. The board basically said, 'We have a strategy, we will execute it regardless of who is in the chairman's seat.' Luna: And the results speak for themselves. Samsung's semiconductor revenue surpassed its mobile revenue for the first time in 2021, and it has stayed ahead since. By 2025, Samsung was the second-largest foundry player after TSMC, with about 15 percent market share. Lucas: Fifteen percent doesn't sound huge until you realize TSMC has over 60 percent. But the growth rate is impressive. Samsung's foundry revenue grew at a compound annual growth rate of about 25 percent from 2019 to 2025. The board's patience is paying off. Luna: And we should mention the competitive landscape. Intel is trying to break into foundry with its IDM 2.0 strategy. TSMC is building fabs in Arizona and Japan. Samsung is building a $17 billion fab in Taylor, Texas. This is a three-way race. Lucas: The board's role here is to allocate capital across these massive projects while managing geopolitical risk. Samsung gets a huge portion of its revenue from China. The us china chip war creates a tricky balancing act. Luna: I want to bring up something that often gets overlooked — the cultural shift. Samsung's board historically operated with a top-down, almost feudal structure. The pivot required a more professional, meritocratic governance model. Lucas: Yeah, that is a great point. In 2020, Samsung declared an end to the 'no union' policy that had defined its labor relations for decades. That was a board-level decision. It signaled a break from the old chaebol mentality. The board understood that to attract top engineering talent for the chip business, they needed a more modern corporate culture. Luna: And that talent is expensive. Samsung's R&D spending hit $22 billion in 2025, much of it in semiconductors. The board has to justify that to investors who might prefer buybacks. Lucas: Speaking of buybacks — and if you have found any value in these deep dives into how boards actually think, this is the kind of conversation that takes research and time to produce. A couple of dollars a month at buy me a coffee dot com slash fexingo genuinely helps keep these episodes ad-free and independent. No pressure — just if the show has moved your work forward in some small way. Luna: It really does make a difference. We hear from listeners who say these boardroom dynamics have changed how they think about their own companies. Lucas: Alright, back to the numbers. In 2024, Samsung's semiconductor division posted operating profit of $18 billion, while mobile was around $10 billion. The board's bet is now the dominant profit driver. Luna: But there's a risk. Memory chips — DRAM and NAND — are cyclical. Samsung's memory business has seen boom and bust cycles for decades. The board's pivot to logic chips and foundry is partly about diversifying away from that volatility. Lucas: Right. Foundry contracts are typically long-term, with customers like NVIDIA, Qualcomm, and AMD. That provides more stable revenue. But it also requires constant capital expenditure. Samsung spent $37 billion on capex in 2025, most of it on chip equipment. Luna: The board has to be comfortable with negative free cash flow for years. That takes conviction. Especially when the stock price dips because of memory downturns. Lucas: And Samsung's stock has been volatile. It traded around 60,000 won in 2019, hit 90,000 in 2021, then dropped to 55,000 in 2023 during the memory slump. As of mid-2026 it's around 80,000. The board has held the course. Luna: Part of that conviction came from Lee Jae-yong's personal involvement. Even while on trial, he held meetings with chip executives. The board never wavered in supporting his strategic direction. Lucas: There is a lesson here for other companies. When the top leader is distracted or under legal pressure, the board needs to be strong enough to keep the strategy alive. Samsung's board created a system where the semiconductor division had autonomy and resources regardless of what happened in the courtroom. Luna: One more thing — Samsung also invested heavily in packaging technology. In 2024, they opened a $15 billion advanced packaging facility in Korea. That is the kind of bet that doesn't pay off for five to seven years. The board has to have a long time horizon. Lucas: And they do. The founding family still holds significant sway — the Lee family controls about 20 percent of shares through a complex web of cross-holdings. That gives them a long-term perspective that institutional investors sometimes lack. Luna: But it also creates governance risks. The line between family interest and shareholder interest can blur. Lucas: Absolutely. In 2022, Lee Jae-yong was pardoned, and he immediately rejoined the board. Critics said it undermined the board's independence. Supporters said it brought back the visionary leader. The board did not change the strategy either way. Luna: That consistency is the hallmark of a well-functioning board. They set a direction and they stick to it through turbulence. Lucas: The Samsung story is a case study in how a board can transform a company by betting on a completely different industry. It is not just about approving budgets. It is about convincing shareholders, reshaping culture, and staying the course for half a decade or more. Luna: And the competition isn't standing still. TSMC is spending $44 billion on capex this year. Intel got $8.5 billion in CHIPS Act grants. Samsung cannot afford to slow down. Lucas: No, they cannot. But the foundation is set. The board has transformed Samsung from a fast follower in phones to a leading player in the most critical technology of the 21st century. Whether they can overtake TSMC remains to be seen, but they have given themselves a real shot. Luna: And that is the kind of boardroom conversation that deserves more attention. Thanks for joining us. Lucas: Next time, we look at how the board of a major airline navigated the post-pandemic travel boom. Until then.