Samsung, SK, LG address uncertainties by slashing conventional operating costs
Samsung, SK and LG are tightening their belts in response to prolonged business uncertainties which are expected to prevail even throughout this year, according to industry officials, Sunday.
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| Office workers ride an escalator at an office building in Seoul in this undated file photo. (Source: Yonhap) |
The conglomerates are slashing their conventional operating costs and refraining from paying bonuses, in anticipation that an unfavorable macroeconomic outlook, triggered by high interest rates, will remain in place for the time being. Samsung and SK - which both have cash cow chip businesses that rely heavily on the semiconductor market cycle - are particularly bracing for the worst-case scenario, hit by the aftermath of their drastic earnings falls last year after the global semiconductor cycle bottomed out.
The latest decision by Samsung Electronics shows the firm’s strong willingness to tackle the widening market uncertainties. Last week, the nation’s largest firm by market capitalization decided to freeze the salaries of executives this year for the first time since 2015 as part of belt-tightening steps, after its device solutions unit in charge of its chip business suffered a deficit of more than 12 trillion won ($9.72 billion) for the first three quarters combined last year.
SK hynix, another top-tier memory chipmaker along with Samsung, also reported an operating loss exceeding 8 trillion won during the same period, hit by the negative chip market conditions.
Industry officials said major conglomerates here will continue to manage their operating expenditures conservatively this year, even if the nation’s exports are forecast to bounce back after bottoming out in 2023.
"The control tower of our group has already begun to step up monitoring the use of corporate cards for each division, and urge employees and executives to reduce their spending with the cards,” an official at one of the nation’s major conglomerates said. “This was not the case before the global economy entered a cycle of monetary tightening a couple of years ago.”
He added, “We are reducing our business meetings with clients amid internal pressure, and such measures are expected to continue until our earnings achieve a meaningful rebound.”
LG is also on track to follow in the footsteps of Samsung and SK, as some of its cash-cow affiliates reported weaker-than-expected earnings results.
LG Energy Solution, the largest affiliate within LG Group by market capitalization, announced a preliminary operating profit of 338.2 billion won for the fourth quarter of 2023, a drop of 53 percent from the previous quarter. In February 2023, the LG affiliate offered 870 percent of its employees’ basic salaries as a bonus, but the figure is widely expected to be slashed by a huge margin this year amid a weak outlook for the industry.
(Source: Korea Times)
