Major S. Korean Firms Feel Pinch of Rising Material Costs | Be Korea-savvy

Major S. Korean Firms Feel Pinch of Rising Material Costs

This file photo shows the buildings of South Korea's major companies in Seoul. (Yonhap)

This file photo shows the buildings of South Korea’s major companies in Seoul. (Yonhap)

SEOUL, Aug. 19 (Korea Bizwire)Major South Korean companies have seen their cost burdens rise sharply in 2022 from a year earlier on surging raw material prices and wage increases, data showed Friday.

Their rising cost burdens are widely feared to undercut their profitability down the road amid flagging demand stemming from worries over a global economic recession and runaway inflation.

Global tech titan Samsung Electronics Co. saw its purchase prices of raw materials spike nearly 25 percent on-year to about 58.1 trillion won (US$43.8 billion) in the first half of the year, according to its semiannual report.

Prices of mobile application processors used in smartphones jumped 58 percent on-year, with those of camera modules climbing 10 percent. Samsung is the world’s largest smartphone manufacturer.

Prices of wafers used for making semiconductors rose 4 percent, with costs of steel sheets, plastic and copper, key raw materials of home appliances, remaining high.

Given the current trend, Samsung’s material costs are predicted to set a new record this year. Samsung’s purchase prices of raw materials hit a fresh high of 103.7 trillion won last year.

Making matters worse, Samsung’s labor costs swelled around 14 percent on-year to 15.9 trillion won in the January-June period.

Samsung’s pay increase came to 9 percent this year, with its workforce reaching a new high of around 117,321 as of end-June, up 6,240 from a year earlier.

A mobile phone shop in Seoul (Yonhap)

A mobile phone shop in Seoul (Yonhap)

Samsung is not alone. Home appliance titan LG Electronics Inc. saw its material costs swelling 17.8 percent on-year to 20.7 trillion won in the six-month period, according to its semiannual report.

Steep prices soared 22 percent on-year in the first half, with those of plastic and copper jumping 20.3 percent and 40.2 percent, respectively.

LG’s first-half labor costs stood at 4.9 trillion won, up roughly 23 percent from the same period a year ago.

Global chip giant SK hynix Inc. said in its half-year report that its raw material and labor costs shot up 44.4 percent and 45.4 percent on-year, respectively, in the first half.

An industry source said other large companies in Asia’s fourth-largest economy are also feeling the pinch of rising costs stemming from soaring international raw material prices and a weak Korean currency against the U.S. dollar.

The South Korean won has been losing ground against the greenback this year, making local companies pay more for raw material imports.


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