Samsung: Too big to fail?


The South Korean multinational conglomerate Samsung has been growing influence over our daily lives and by consequence its home country’s government.  Samsung is part of the three biggest chaebols. Chaebols are large family-owned conglomerates subsidized by the government during South Korea’s economic rebuild after the end of the Korean War in 1953. Samsung is the biggest conglomerate in South Korea, operating 59 subsidiaries with no less than $208.8 billion in revenue and $31.74 billion in operating profits in 2020. Samsung currently accounts for 20% of the Korean stock exchange and 15% of the country’s economy. It recently invested in an $83 million partnership with colleges to train semiconductor majors and invested $148 billion to grow its artificial intelligence, biotech, 5G communications, and automotive electronics making them the biggest source of R&D in South Korea. Samsung’s product portfolio ranges from clinics to funeral services to shipyards to military equipment which allows you to come to life and perish having only used Samsung products. It also supplies Apple Inc’s flash memory, mobile RAM (A4 chip), processors, screen panels, and so much more. 

So, is Samsung too big for the South Korean government to let fail?

“Samsung’s failure would have a too catastrophic impact on the South Korean government/economy”.

Samsung directly supports its government with social services such as universities, schools, hospitals, housing complexes amongst many others. The government relies on Samsung to resolve its unemployment due to its size and rapid growth. As a response to a government request in 2018, Samsung electronics promised to create 40,000 new jobs in the next three years.

Keeping Samsung afloat creates competition within the marketplace: forcing other businesses to reach the international standards imposed by Samsung to be competitive. Samsung’s continuance would allow for its partner startups and SMEs to continue their development. However, the government has given Samsung too much freedom and advantages which has resulted in a lack of fairness in economic competition, ultimately making Samsung a monopoly within South Korea.

Samsung equally supports the South Korean government on the political stage. As seen in the third summit with North Korea in 2018 where Samsung electronics CEO Lee Jae-Yong was invited to participate and accompany president Moon Jae-in. Samsung gives the government immense negotiating power due to its economic importance worldwide.

The fall of Samsung would consequently cut the revenue stream and the tax payment of the contractors working with Samsung. Its entire labour force would be laid off which would lead to a predicted increase of 7.1% unemployment rate neglecting contractors which rely solely on Samsung which are predicted to be double. Consequently, schools, hospitals, and other services would become more expensive and unaffordable for a large portion of the population unless the government increases its budget for it neglecting other services. Foreign investors would leave the domestic stock exchange and financial market. The country’s national pension service is estimated to lose $16.7 billion in investment. Hence, the government would be incapable to accomplish its basic responsibilities to its population due to the loss in the revenue stream. Globally if Samsung fails, South Korea is at risk of a more severe economic crisis than in 1997.

However, as stated by CFR, “Chaebols, once seen as instruments of growth, have become financiers for the government and contribute more to the Korean social inequality than to society.” Meaning a failure would get rid of its monopoly and corruption within the government, temporarily allowing SMEs to grow before other chaebols take over its position. Meaning, if the government helps Samsung, it would tarnish the government’s reputation, which was built on an anti-corruption agenda after former President Park Geun-Hye was imprisoned for 24 years and Samsung CEO following a corruption scandal. There has as well been averred investigation cover-ups, employee scandals, financial scandals, tax evasion, and antitrust allegations ties to Samsung.

To answer the question “to what extent is Samsung too big for the South Korean government to let it fail,” Samsung is too big of a benefit for the government. Samsung’s political, economic, social and scientific role is too important for the South Korean government, helping them accomplish their responsibilities (protect, provide, and invest in talent) to their population. Additionally, its failure would be catastrophic with few positive impacts being: a symbolic start to stop corruption and collusion and the removal of all of Samsung’s human rights violations. The government intervention to keep Samsung afloat neglecting the population’s request to stop corruption may harm their image. Nevertheless, considering the failure of Samsung would lead to a major economic crisis and the South Korean safety net is not sufficient, Samsung is too big for the South Korean government to let fail.

This was an analysis based on a hypothetical but possible situation to which the South Korean government must have an answer. Simultaneously we must also ask ourselves: If Samsung is too big for the South Korean government to let fail, where does the real power lay?

This article was a compression of 4000 words into 800 based on my Extended Essay I wrote for my IB diploma. If you wish to get my full opinion and analysis you can find it with this link.

Veaux, F. (2020). An Exploration of The Importance of Samsung To the South Korean Government.

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