Business activities of major companies, including investment and production, are shrinking due to the unprecedented challenges marked by three highs: high inflation, oil prices, and exchange rates. As the Korean won-to-dollar exchange rate is surging, companies are pending or reviewing their investment plans considering cost and saving up cash as much as possible to avoid the worst-case scenario.
According to the business sector on Friday, major Korean companies are busy evaluating their business plans due to a deteriorating business environment and demand declines caused by the three highs. On Thursday, LG held a CEO workshop on site in three years to discuss its mid to long-term business strategy. Samsung also held a CEO meeting on Monday to discuss current economic issues, while SK is planning to hold a CEO seminar in October.
Many companies have also halted their investment at home and abroad. Hyundai Oilbank and Hanwha Solutions retracted their plans to establish major facilities. Micron, a U.S. memory chip maker, also announced Thursday that it would reduce next year’s investment by 30 percent. On Thursday, Apple stock prices plunged by 4.9 percent as it recently withdrew from its plan to increase production for iPhone 14.
As global tech companies have shrunk their investment plans, the production of semiconductors, Korea’s main export item, dropped by the largest margin in 14 years. According to Statistics Korea’s Monthly Industrial Statistic, August saw a 14.2 percent drop in semiconductor production month on month, recording the biggest decrease of 17.5 percent since December 2008. The Cyclical Component of the Composite Leading Index, which predicts the turning point in the business cycle, decreased by 0.2 points to 99.3 from the previous month.
As economic situations have exacerbated in Korea, the government gathered executives from major companies to develop solutions. President Yoon Suk-yeol held a meeting to review macroeconomic and financial conditions on Friday at the Korea Federation of Banks with financial experts from large companies, including Samsung Electronics, SK, LG Electronics, and Hyundai Motor. “Global interest rate hikes and market insecurity are slowing down the real economy,” President Yoon said. “We will share the challenges of companies experiencing firsthand and develop solutions with experts in the macro-economy and finance and financial executives from top companies.
Choong-Hyun Song firstname.lastname@example.org