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Samsung cannot be complacent despite record earnings

Posted October. 06, 2018 07:20,   

Updated October. 06, 2018 07:20


Samsung Electronics saw its operating profit hit an all-time high at 17.5 trillion won (15.4 billion U.S. dollars) in the third quarter of this year. The semiconductor business alone raked in more than 13 trillion won (11.5 billion dollars) in operating profit. The company posted quarterly sales of 65 trillion won (57.5 billion dollars), the second best performance after the fourth quarter of last year when it posted 65.98 trillion won (58.3 billion dollars). These impressive earnings surpass market expectations that predicted the semiconductor business would be sluggish, with certain foreign institutional investors including Morgan Stanley recently claiming that the semiconductor price reached its peak. Among Korea’s flagship industries, the shipbuilding sector is already on the decline, while the automobile industry is losing steam. As such, it is all the more fortunate that Samsung Electronics maintains its robust performance.

Nonetheless, Korea cannot afford to be complacent in light of a grim reality. When considering Samsung Electronics’ earnings alone, the semiconductor business accounts for nearly 80 percent of its total operating profit that includes numbers of the home appliances and mobile businesses, revealing a significant imbalance in profitability. For this reason, top Samsung managers are constantly trying to make their staff remain vigilant and seeking to nurture its next cash cow businesses, saying every time that “Even a giant ship can sink instantly.”

Given that Korea’s No. 1 company is sensing a potential crisis, the Korean economy as a whole should naturally feel a sense of crisis. As Korea’s export is concentrated so much on semiconductors that the industry accounts for 17 percent of the nation’s total overseas shipment, and this misleading strong export performance resulting from robust semiconductor shipment could also disappear at any time. The fate of major manufacturing industries including automobile, steelmaking, petrochemicals and semiconductors is a matter of survival and death that could determine the viability of not only the companies in question but also the entire national economy. The government's recently-announced policies and revision bills for the Commerce Code and the Fair Trade Act make us wonder if the government has sufficiently agonized over such gloomy reality.