Chapter 19: Breaking Point

At 7:50 AM Korean time, an incident occurred on Hawaiian Airlines flight HAL745, which was en route from Las Vegas to Hawaii. An L6 device exploded during the flight.

The L6, which had been in the passenger's pocket, exploded, causing burns to the passenger's thigh and fingers. The aircraft returned to the departure airport just 30 minutes after takeoff for an emergency landing. It was reported that the passenger had exchanged their L6 for a recalled product the previous day.

This news was immediately transmitted to media outlets worldwide, leading all airlines in the United States to ban the carrying of L6 devices in cabins and checked luggage.

Korean media also covered the story as breaking news, showing passengers stranded at the airport with their L6 devices.

8:35 AM.

An emergency meeting was convened at the headquarters of Seoseong Electronics in Gangnam. Black sedans continuously entered the parking lot, capturing the presence of IM Division President Jo Dong-jun and other executives, including Vice Chairman Lim Jin-yong, on camera.

9 AM.

Following the market opening, Seoseong Electronics' stock plummeted by a staggering 10%. The KOSPI index also fell by 38 points.

Foreign investors took short positions, selling off Seoseong shares in both futures and spot markets. By the afternoon, the stock had fallen by as much as 13% as institutional investors joined in the sell-off.

All eyes were on the Gangnam headquarters.

Online, posts were being uploaded in real time, with securities firms releasing reports.

Most were recommendations to buy Seoseong Electronics, with no sell recommendations in sight.

[When the financial crisis struck, the stock price of Seoseong Electronics fell to the high 300,000s. Investment expert Park Il-chan stated at the time: "You will not have another opportunity to buy Seoseong Electronics at this price."]

Since then, Seoseong's stock has more than quadrupled, proving him right.

This time is no different. Although the explosion of the L6 is an unprecedented event, it is merely a short-term negative factor. For long-term investors, now is the best opportunity to buy Seoseong Electronics stock at a low price.

"Is it really a buying opportunity?"

I muttered in disbelief.

"What are these crazy people thinking?"

If it were such a good deal, they should buy it themselves. While recommending aggressive buying to institutions, they were simultaneously dumping their shares. What kind of nonsensical behavior was this?

Thanks to the constant influx of articles and reports, amid the institutional sell-off, only individual investors were struggling to prop up the stock.

Of course, individual investors weren't fools.

The reason they were buying in was likely that they judged the worst-case scenario of discontinuation could be avoided.

Once the meeting ended and a strategy was revealed, the plummeting stock price would likely rebound.

What choice would Seoseong Electronics make?

Seoseong Group Gangnam Headquarters Main Conference Room.

Executives from not just the IM division, but also from CE, semiconductor, and display sectors gathered, with those on business trips excluded.

The individuals present were essentially the top brass that operated Korea's leading company, Seoseong Electronics. Their combined salaries alone amounted to several hundred billion won.

They gathered in one place due to the unprecedented incident of the L6 explosion. Perhaps for this reason, everyone wore grim expressions and spoke very little.

"Vice Chairman Lim is entering."

As Lim Jin-yong walked into the conference room, the executives stood up in unison.

"Please take your seats."

Lim Jin-yong sat in the chairman's seat, a position originally held by his father, who had been incapacitated and hospitalized for a year. Even if he recovered, returning to management would be unlikely.

Though his title was vice chairman, Lim Jin-yong was essentially acting as the chairman of Seoseong Group.

He looked around at the executives and spoke.

"You all understand the situation we're in. If the battery was the issue, why did a product with a replaced battery explode?"

The executives' gazes turned to IM Division President Jo Dong-jun.

Jo Dong-jun opened his mouth.

"We are currently investigating the cause of the explosion."

"How long do you think it will take to get results?"

In response to Lim Jin-yong's question, Jo Dong-jun answered.

"If things go smoothly, we might have an answer within a week, but we'll need more time to accurately determine the cause."

The rushed recall was the problem.

Even if it took time, they should have ensured they identified the root cause and addressed it properly.

"Do we have a solution?"

The head of the Future Strategy Office, Kim Myung-soo, spoke.

"For now, we need to buy time with a recall announcement and find the cause during that time."

"Are you suggesting another recall?"

"Buying time is the priority."

It wouldn't be convincing to consumers if they said they would fix the products now, so a recall was the best course of action.

The problem was that this was already the second incident, and whether they could find the cause in the meantime was uncertain.

"That's the best option to minimize losses."

There was one more method available. However, no one dared to speak of it, as the anticipated losses were too significant.

Thus, opinions converged on buying time while searching for a solution.

Now the decision lay with the owner.

Lim Jin-yong hesitated to make a decision.

"What would be the best course of action? What would my father have decided?"

His father had built the company, and now it was his responsibility to lead it after his father had fallen ill.

As he pondered, something caught his eye. In one corner of the conference room, a display case held a wooden model ship.

Lim Jin-yong recalled his grandfather carving wood to create model ships when he was a child. Back then, his grandfather had placed him on his lap and said this:

"Businesses are like the ship of Theseus."

At the time, he didn't understand what that meant.

It wasn't until later that he learned about the Theseus Paradox.

The ship that Theseus and the young men of Athens returned on had thirty oars. The Athenians preserved the ship.

As time went by, the wooden ship began to rot.

As the planks rotted, they were replaced, and as the oars decayed, new wooden oars were fitted in.

After a thousand years of preserving the ship by replacing each part one by one, it became hard to identify the original components of the ship.

As this unfolded, philosophers in Athens raised a question:

Is this ship the same ship as before, or a different one?

An object can be replaced piece by piece until nothing of the original remains, yet it can still appear to be the same object.

The same applies to businesses.

Seoseong Electronics was established after the Korean War. At that time, the company was merely assembling white goods by acquiring technology from Japanese electronics companies.

None of the employees who worked back then remain with the company today. None of the products manufactured then are still being produced. The headquarters and factories have moved several times.

People have changed, the products being produced have changed, and the locations have changed. Everything has changed, yet Seoseong Electronics is still Seoseong Electronics.

So, what truly defines Seoseong Electronics?

In that moment, I felt a surge of clarity. As my tangled thoughts organized into a single idea, a path became visible.

The executives were all looking at him.

Lim Jin-yong surveyed them and said,

"Effective today, we will discontinue the L6. Announce that we will refund all sold products and provide adequate compensation to consumers who wish to exchange their devices."

At that moment, a stir arose among the executives.

Discontinuation was the worst possible choice they could imagine.

Not only would they have to refund all products sold to date, but they would also have to give up future sales. The company's reputation would also inevitably suffer.

"No matter how much we lose, we can earn that money back. But if the company loses its trust, that's the end. We have lost customer trust by creating problematic products. And by proceeding with a recall without resolving the issues, we have lost trust once again. This is our last chance."

His voice was calm, but his tone was resolute.

As silence fell, Jo Dong-jun, the president of the IM division, stood up.

"I will prepare the announcement immediately."

1:40 PM.

An emergency press conference was held at the Seoseong Electronics headquarters in Gangnam.

IM Division President Jo Dong-jun stood before the reporters.

With a somber expression, he read the prepared statement.

"Seoseong Electronics has decided to suspend sales and exchanges of the L6.

While we are currently conducting a thorough investigation to determine the cause, we have made this decision with customer safety as our top priority. We urge customers currently using the L6 to turn off the device immediately and either exchange or refund it. We sincerely apologize for the great inconvenience and concern caused to our customers, partners, and all those who trusted and loved the L6."

Everyone was taken aback by the announcement of the discontinuation they had never imagined.

Reporters rushed to ask questions.

"Whose decision is this?"

"What do you estimate the losses to be?"

"Do you have a plan of action after discontinuation?"

Jo Dong-jun calmly responded to the reporters' inquiries.

To date, over 6 million L6 units have been sold, with projected sales of 70 million units.

Refunding all of these would lead to an immediate loss of 6 trillion won by simple calculation. Considering costs associated with the recall and inventory disposal, the financial loss would be even greater.

Future expected revenues would vanish, and the decline in market share in the smartphone industry, along with damage to the company's image and trustworthiness, would lead to even larger losses.

Experts predicted that the total losses for Seoseong Electronics from this incident could reach a minimum of 20 trillion to 50 trillion won.

By the time the press conference ended, individual investors had shifted from buying to selling, and as foreign and institutional sell-offs commenced, along with program selling, the stock price of Seoseong Electronics plummeted to the limit down.

There were no more buy orders, only sell orders piled up.

As the stock price of Seoseong Electronics, which held the largest weight in the index, crashed, the KOSPI index fell by over 100 points in an instant, prompting a trading halt via the circuit breaker.

The KOSDAQ was not spared either.

Although Seoseong Electronics was not included in its index, many IT-related component stocks were present.

With Seoseong Electronics hitting the limit down, it was impossible for the small and medium enterprises supplying parts to remain unscathed.

Related component stocks all plummeted to the limit down.

Compared to the KOSPI, the proportion of individual investors in the KOSDAQ is significantly higher.

As individual investors began to sell off, stocks in completely unrelated sectors, including pharmaceuticals and travel, also began to crash.

The KOSDAQ also triggered a circuit breaker, leading to a 5-minute trading halt.

While it's not uncommon for circuit breakers to activate on the KOSDAQ, this was the first time since the financial crisis that a circuit breaker was triggered on the KOSPI.

After 5 minutes, trading resumed, but it could not prevent the downward spiral. Instead, there was a growing fear that prices might drop even further as time went on, leading everyone to abandon their stocks.

The KOSPI index fell by approximately 6.3% compared to the previous day's closing price, and the KOSDAQ index dropped by 8.7%.

This marked the beginning of what would later be known as "Black Tuesday" in the history of the Korean stock market.