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Samsung chief in jail, mentor in charge

The arrest of Samsung Group scion Jay Y Lee on bribery charges could hamper decisions on strategic investments and acquisitions at the sprawling conglomerate, insiders and former executives say, even with a strong leadership bench at its many businesses.

Although business at flagship Samsung Electronics is humming along, big calls will need to be made and the man most likely to be called upon to make them is Choi Gee-sung, the No.2 lieutenant at Samsung Group and a mentor to Lee.

"Choi is very experienced and has done a good job. He is the one best placed to manage group-level affairs in Lee's absence," said one Samsung insider.

While Samsung Electronics is still smarting from the debacle of its exploding Galaxy Note 7 smartphone batteries, its semiconductor business is in rude health. Its share price is up around 60 per cent in the past year.

But the wide-ranging probe, part of a corruption scandal that led parliament to impeach South Korean President Park Geun-hye, has been a major distraction for the country's largest conglomerate, or chaebol.

"Everything has virtually stopped," said a second executive at Samsung Group's powerful strategy office that Choi heads.

"We're mainly focusing on the prosecutor's investigation (into Lee and Samsung)... We'll be running an emergency plan and everything will be under Choi's control for now."

But some others say even Choi's role could be limited and Samsung may have to rely more on each affiliate's top management, with Choi also under investigation by special prosecutors.

"Since we've decided to dismantle group strategy office, Choi's role is likely to gradually decrease, although we can't say for how much and when," another Samsung executive said.

A fourth group insider said: "We have a system in place with professional management teams, so in terms of the day-to-day operations things should be fine."

But arrest of Lee, 48, will have an impact on longer-term investment decisions at the sprawling conglomerate.

As head of strategy, 66-year-old Choi has acted as Jay Y Lee's mentor and been closely involved in preparing the path for him to take over from his father, who was incapacitated by a heart attack in 2014.

Under Choi's guidance, Lee has moved closer to succeeding his father in a well-choreographed long-term plan, including a restructuring of the conglomerate to cement the Lee family's control.

However, that plan included a controversial $US8 billion merger of two Samsung units that has been central to prosecutors' case against the group, and Lee.

Prosecutors accuse Samsung of paying bribes totalling 43 billion won ($US37.74 million) to organisations linked to South Korean President Park Geun-hye's friend, Choi Soon-sil, to secure government backing for the merger.

Choi Gee-sung and his deputy Chang Choong-ki were quizzed by prosecutors over their role in the deal.

Lee's absence, ahead of what could be a lengthy trial, could also see a bigger role for Kwon Oh-hyun, Samsung Electronics' vice chairman and current CEO.