by Yoo Seungki

SEOUL, April 2 -- Samsung Group, South Korea's largest family-run conglomerate, has entered a new era under the third- generation leadership. Lee Jae-yong, the only son of Samsung Electronics chairman Lee Kun-hee, has been effectively running the "Ferry Samsung" since his father was hospitalized in May 2014 for a heart attack.

The ferry under the helm of a new captain has set sail with a strong headwind. Sales of Samsung's flagship Galaxy smartphones, which Samsung Electronics depends on more than half of its revenue, declined sharply. The sense of crisis emerged as the tech giant appeared sandwiched between Apple and fast-growing Chinese rivals.

"Chinese manufacturers will certainly surpass Samsung in almost all tech products, except for some areas such as semiconductors. Finding a breakthrough will be the first test for Lee Jae-yong's management ability," said a senior executive of a foreign bank's Seoul branch, who declined to be identified, in a recent interview.

When talking about the junior Lee's management ability, the most-used words are "unproven" and "untested." The 47-year-old has shown few accomplishments since he joined Samsung in 2001. Not a few people still remember the failure of e-Samsung, the Internet venture that was launched by the younger Lee in 2000 amid the dot- come bubble and went under a year later with heavy losses.

"Vice chairman Lee Jae-yong's business, run before he came to Samsung, went bankrupt, and the assessment over him is being divided internally," an employee at the section-chief position of Samsung Electronics told Xinhua.

"I heard that he hasn't fully controlled the management. As seen in stock price movement, expectations for him appeared less than those for his sister Lee Boo-jin, president of Hotel Shilla," the employee said.

OPEN STRATEGY, IT-HEALTH CONVERGENCE

To overcome the sense of crisis and concerns over his management ability, the Samsung Electronics vice chairman selected a convergence of its powerful IT, mobile technology and health care as an open strategy for another leap forward.

Lee said during his six-day visit to China for the 2015 Boao Forum for Asia (BFA) conference that the convergence between IT, health care, bio-tech and tourism, which Samsung will push for, will serve as a new growth engine.

He said at the same conference last year that the smartphone market would be hard to keep such an unprecedented growth trend as shown in the past seven years.

The new vision is the heritage from his father Lee Kun-hee, who declared biomedicine and medical equipments as part of the company 's new growth engines in 2010. Kwon Oh-hyun, vice chairman of Samsung Electronics, said in November 2014 that the global mobile- health care market would expand from the current 5 billion U.S. dollars to about 200 billion dollars by 2020.

Given the elder Lee's insight into the future, the convergence strategy would give a new opportunity for Samsung to be reborn as a fresh, but now unimaginable, company. After finding growth opportunities in chips and mobile phones, Lee Kun-hee transformed Samsung into the world's largest tech company by sales.

Samsung was founded in 1938 by Lee Byung-chull, who transformed a small trading company in rural areas into one of South Korea's top three conglomerates until his death in November 1987. His third son Kun-hee took over the reins of the group in that month, and built the Samsung of today under his charismatic leadership.

One of his famous anecdotes was that he ordered the burning of about 150,000 faulty mobile phones in front of thousands of workers and executives in 1995, alerting them to the importance of product quality. He transformed Samsung into the world's No.1 memory chip maker despite prevalent worries in 1970s that Samsung was at least 20 years lagging behind rivals in the United Statesand Japanin terms of technology.

HIDDEN STRATEGY, KOREAN BLACKROCK

While inheriting the convergence vision from his father, Lee Jae-yong seemed to have selected finance as his own vision. " Rumors spread among market players that Samsung Group would set up the Korean version of BlackRock. Vice chairman Lee has allegedly visited Hong Kong several times to contact bankers and financiers for it," said a senior executive of a foreign bank's Seoul branch.

BlackRock, founded in 1988, is the world's biggest asset manager with an estimated 4.6 trillion dollars of assets under management. "BlackRock has strength in the ETF and index fund. Samsung Asset Management has a similar management structure," said another executive of a foreign brokerage's Seoul branch.

Samsung Asset Management, one of Samsung Group's finance units, was acquired in May 2014 by Samsung Life Insurance, a core part of the group's complex ownership structure. The country's largest life insurer with some 200 billion dollars in assets is the largest shareholder of Samsung Electronics. Lee Jae-yong has a 25. 1 percent stake in Cheil Industries, the group's de-facto holding company, which in turn owns a 19.4 percent stake in the life insurer.

"The merger between Samsung Life and Samsung Asset will create synergy. Samsung Asset has allegedly spurred the development of ETF and index fund products," said the executive.

According to local media reports, the junior Lee recently instructed executives of the group's finance units to seek M&As and business opportunities with global players to make inroads into the global financial market.

Prospects are divided over whether the junior Lee's "BlackRock project" will succeed.

"A finance company's success depends on man. After Lehman Brothers and Bear Sterns collapsed and their assets were sold to separate players, most of best minds quitted the companies. Even if Samsung acquires foreign players, it might gain an empty shell alone. It is doubtful whether the manufacturing-driven Samsung with a rigid corporate culture could understand the culture of the

finance industry," said the former executive.

"There are lots of young South Korean talents who studied finance abroad. If Samsung hires them adequately and develops global networking via them, it would become one of the world- famous asset managers," said the latter executive.

UNPROVEN

The divided forecasts for Lee Jae-yong's push for finance reflects the remaining worries about his management ability. According to a survey released on March 30 by the private Economic Reform Research Institute, he ranked seventh in terms of management ability among 11 heirs apparent of the country's conglomerates who have more than five years of management experience.

More than one-third, or 36.7 percent, of respondents cited the dearth of management ability as the biggest issue in the transfer of management control from parents to children. Some 30 percent denounced illegal inheritance of wealth.

Lee Kun-hee sold convertible bonds, issued by Cheil Industries (formerly Samsung Everland) and Samsung SDS, to his son Jae-yong at far below fair market prices. The junior Lee made billions of dollars of profits after the group's de-facto holding company and the IT services unit floated shares last year.

Under the son's leadership, Samsung Electronics, the group's crown jewel, saw its market share eroded by archrival Apple and rising Chinese competitors, including Xiaomi, Huawei and Lenovo. Its global smartphone market share tumbled to 24.7 percent in the third quarter of 2014 from 35 percent a year ago, according to researcher Strategy Analytics.

The junior Lee, who received a master's degree at Japan's Keio University and studied at Harvard Business School for about five years, is known to be sociable and approachable, a personality that can help change the company's rigid corporate culture and expand cooperation with global players.

When he was promoted to vice chairman of Samsung Electronics in 2012, the company credited him with enhancing partnerships with client companies and even rivals like Apple.

He plans to introduce a flexible work-hour system from mid- April, which will allow employees to adjust work hours at their convenience, to help form a corporate atmosphere for creative mindset. But, it is doubtful whether his non-charismatic management having carrots without sticks would succeed.