Samsung Electronics, the world market leader for smartphones and electronic memory components, has a new chairman.

After years of waiting, Samsung heir Lee Jae-yong takes over the position previously held by his father and grandfather, the company's founder.

Lee, 54, comes in at a time of rapid downturn in core consumer electronics sectors after sales of computers and smartphones plummeted.

Patrick Welter

Correspondent for business and politics in Japan based in Tokyo.

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Samsung Electronics itself does not expect demand in the electronics sector to recover until the second half of next year.

"Without a doubt, we are at a pivotal moment," Lee was quoted as saying in a statement.

Now is the time for decisive action and steadfastness.

In the role of Chairman of Samsung Electronics, Lee decides on the Samsung conglomerate's major strategic investments and potential acquisitions.

There has long been speculation on the financial market in Seoul as to when Samsung, with its well-stocked coffers, will buy companies in order to strengthen its technical knowledge.

The largest of South Korea's family-run conglomerates has recently focused its strategic investments on biotechnology and on the foundry business, which produces semiconductors for customers.

Record sales with falling profits

Samsung reported Thursday that despite record-high sales, third-quarter profit fell 23.6 percent from the same period last year to 9.39 trillion won.

Revenue increased 3.8 percent to 76.78 trillion won.

Samsung benefited from the strong devaluation of the South Korean currency against the US dollar.

In net terms, this increased operating profit by 1 trillion won (around 700 million euros).

Overall, operating profit fell 32 percent to 10.85 trillion won.

One reason the electronics industry is struggling is that consumers, battered by inflation and scared by the war in Ukraine, are shedding purchases.

At the same time, the industry is experiencing a slowdown in the business cycle after demand for computers and consumer electronics products was exceptionally strong during the pandemic.

Samsung is noticing this especially in its bread-and-butter business with memory chips, which are ubiquitous in electronic products ranging from computers and data centers to video game consoles and smartphones.

At 15.2 trillion won, sales of the memory chips were 27 percent lower than a year ago.

Decline in semiconductor business could be compensated

The entire semiconductor division contributed only 5 trillion won to the operating profit, or only half of the previous year's value.

In sales, but not in profit, the other divisions of the group were able to compensate for the slump in the business with memory chips.

The company hopes for a recovery in this business in the second half of next year.

Like Samsung, other leading companies in the semiconductor industry, and above all the specialists for memory chips, are giving a rather gloomy outlook for the coming year.

The South Korean competitor SK Hynix, for example, only announced on Wednesday that it would halve its investments in the coming year and reduce the production of memory chips.

However, Samsung expressly stated on Thursday that it would maintain its investment plans and not adjust them to short-term market fluctuations.

"We are not considering artificially reducing production," Han Jin-man, vice president of the memory business, said in a conference call.

However, Samsung is observing market developments very carefully.

Higher margin smartphones are in focus

In the second most important business area, the business with mobile devices such as smartphones, Samsung intends to focus primarily on top models with higher margins in the final quarter and in the coming year, for which it expects continued solid demand.

In the July-September period, Samsung sold approximately 64 million smartphones and 7 million tablet computers.

Lee Jae-yong has been Vice Chairman of Samsung Electronics since December 2012.

He has been considered the unofficial boss of the Samsung conglomerate for the past few years, after his father Lee Kun-hee had been bedridden after suffering a heart attack since 2014.

Then two years ago, Lee Kun-hee, who early and decisively ushered Samsung into the semiconductor business and became the richest man in South Korea, died.

Succession was delayed out of respect for Lee's father

The fact that his only son is only now becoming his successor is a sign of reverent respect for his father.

On the other hand, the young Lee was sentenced to several years in prison in connection with the bribery scandal involving former President Park Geun-hye.

Last year, Lee Jae-yong, also known as Jay Y. Lee in South Korea and now also called by Samsung in the press release, was released on parole.

But it was not until August that the new conservative and business-friendly President Yoon Suk-yeol pardoned him at the request of the major South Korean business associations.

This means that Lee is no longer restricted in carrying out his duties at Samsung.

However, he is still on trial in South Korea in a different case.

It is about the merger of two companies in the conglomerate in 2015 and allegations of accounting fraud at Samsung Biologics, with which the conglomerate is penetrating the pharmaceutical sector.