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Samsung's Crisis Creates Ripples Across South Korea

AUDIE CORNISH, HOST:

The exploding Galaxy Note 7 phones, the inability to fix them - Samsung is a company in crisis. That's pretty clear. But in its home country, the implications go a lot further. A South Korean newspaper editorial put it this way. When Samsung falters, the South Korean economy is weakened.

Stephanie Studer is Seoul bureau chief for The Economist. We reached her by Skype. Welcome to the program.

STEPHANIE STUDER: Hello. Hi.

CORNISH: So here in the U.S., Samsung is probably best known for its phones and TVs, but of course it's a huge conglomerate that makes all kinds of things beyond electronics. Help us understand just how much Samsung is a part of Korean life.

STUDER: It's absolutely huge. Samsung has 70-odd companies, so it really is a sprawling corporate empire. It's into everything from televisions to credit cards, life insurance, refrigerators, phones. So it really spans the gamut of lifestyle products and consumer goods.

CORNISH: And right now it accounts for roughly a quarter of the country's exports and a fifth of its GDP, right? And yet I understand it's a family-owned conglomerate. How does that work in South Korea?

STUDER: That's right, yes. These are known as chaebol. These were usually established in the early 20th century, and they really helped power South Korea's industrialization in the 1960s and '70s. I think many people are now feeling that, you know, they have an outsize importance in the South Korean economy.

So there's a little bit of a love-hate relationship going on with these huge companies which are still so important. And yet perhaps the Korean economy relies on them far too much.

CORNISH: Has this embarrassment for Samsung extended to the country in any way in terms of national pride?

STUDER: I think it has. I mean in many ways Samsung is an ambassador for Korea in the same way that K-Pop and dramas and Korean food. So I feel like there probably is some embarrassment. And I think that's sort of felt perhaps also in the media coverage as well.

CORNISH: So how are the Korean media tackling this?

STUDER: Well, there does tend to be some self-censorship in the media in Korea. And given the size of Samsung and the importance of advertising for a lot of local media companies here, it tends to tread carefully when it writes about the company. Certainly the founding family, the Lees, is in many ways a sort of - a no-go zone. They're a little bit sort of untouchable.

I think, though, that the press is responding in a way to public sentiment. It's more readily criticizing the corporate ownership side of things, the corporate structure and the ways in which that might need to be reformed. But there have been reports recently, certainly over this recent mess - and basically trying to softball the issue and not make it sound as bad as I think many realize it is.

CORNISH: In the meantime, what's being said about how Samsung itself might recover from this?

STUDER: Well, I think it was very clear this week now after the second round of phones were found to be faulty, too, that it was time to pull the product entirely. That's a really big decision to make. It knows that it's going to lose an awful lot of money. So I think it's realized that it really has to be thinking about its brand now.

It's been emphasizing consumer safety above everything else. And I think now it's going to be focusing on the next phone, which is expected to be the Galaxy S8, which may well come out in the next few months, early next year probably.

CORNISH: Stephanie Studer is Seoul bureau chief for The Economist. Thanks so much for speaking with us.

STUDER: Thank you very much. Transcript provided by NPR, Copyright NPR.