Growing Investment Burden
The rapid depreciation of the Korean currency against the U.S. dollar and rising interest rates are weighing on South Korean enterprises’ overseas investment.
LG Energy Solution’s biggest investment announced since January 2021 is US$4.4 billion to be invested in its joint venture with Honda. When it comes to SK On, it is US$11.4 billion for building a plant with Ford. In the case of Samsung SDI, it is US$2.5 billion for building an EV battery plant with Stellantis.
The three companies are in charge of more than 50 percent of the respective investments. On a won basis, SK On’s investment cost in the project jumped 25.2 percent from 6.551 trillion won to 8.1997 trillion won until Oct. 14 after the investment announcement in September last year. Likewise, the investment cost of LG Energy Solution increased 24.1 percent to 3.1657 trillion won from August 2021 and that of Samsung SDI rose 13.9 percent to 1.7992 trillion won from May last year.
The same is occurring in the petrochemical industry. For instance, Lotte Chemical announced in the third quarter of last year that it would invest US$3.9 billion by 2025 in order to build a petrochemical complex in Indonesia. The total investment was 4.4 trillion won or so at the announcement but it is 5.6225 trillion won at the current exchange rate.
Many companies are trying to deal with the increasing burden by overseas financing, internal reserves utilization, etc. According to some industry sources, Samsung Electronics and SK Hynix, which are building semiconductor plants in the United States, may slow down their investments while checking the exchange rate.