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Warning signals get stronger for investment and employment outlook

Warning signals get stronger for investment and employment outlook

Posted July. 21, 2022 07:51,   

Updated July. 21, 2022 07:51


Large corporates, especially the ones heavily dependent on exports such as SK Hynix and LG Energy Solution begin to put on hold their investment timelines. Big-techs in U.S., including Apple, are also downsizing new recruiting plan. Such changes are coming with the forecast of global economic recession accompanying tighter consumer spending and lower employment rate, as the Federal Reserve is sending a clearer signal to raise the interest rate as necessary to contain inflation rate, which is currently over 9% peak.


SK Hynix, the second biggest memory semiconductor producer in the world, suspended the plan to expand its NAND flash plant in Cheongju, North Chungcheong Province, due to the concerns over already-weak semiconductor price drop from lower demands for electronic goods and higher inventory volume. TSMC, the world’s largest semiconductor foundry manufacturer in Taiwan, and Micron of U.S., the world’s third largest memory producer, are rethinking their plans for scheduled investment. LG Energy Solution is reconsidering its plan to build electric car battery plants in the U.S. quoting the skyrocketing exchange rate and high inflation rate as the basis.

Tech companies are not exceptions to this trend. Apple, the no.1 enterprise of U.S., decided to cut R&D and recruiting budgets for certain business units despite having reported the highest performances ever in its history from the first quarter of this year. Tesla is also seeking to cut 10 percent of its employee. NAVER revised its recruitment plan and decided to hire 30 percent fewer people than the last year. KAKAO and Coupang, among others, are also planning to minimize new employment opportunities. This trend is completely different from early this year, when they were actively seeking new talents by promising higher pays.

The world-wide economic recession is just in the beginning stage and is forecast to be prolonged till the next year if it ends early. Experts say higher unemployment rate and tightened consumer spending are unavoidable in an attempt to control the 41-year-high inflation, by leveraging interest rate as a tool. The economic winter is sweeping the entire globe including China, which recorded 0 percent growth in the second quarter, EU nations on brink of losing Russian gas supply due to the war in Ukraine, as well as emerging countries facing national bankruptcy, hurt by soaring price of oil and raw materials.

Warning signals to Korean investment and employment environment are becoming stronger as a swathe of companies are preparing for business tightening and turning to emergency operations mode. The pledges that new administration under President Yoon Suk-yeol made in May, that it would make the 10 major companies in Korea to invest 1,000 trillion won over a five-year period, with almost 400 thousand new jobs, are about to be delayed or scrapped just two months after his inauguration. The Korean government and political circles need to do everything to help corporates not to lose their appetite for investments and to prevent sudden economic fall-out, by taking all actions necessary from easing regulations, lowering corporate tax to ensuring flexibility in employment with revision of the 52 work-week policy, etc.