Despite 80% Operating Profit Growth
The major subsidiaries of South Korea’s top four business groups, such as Samsung Electronics Co., LG Electronics Inc. and SK Hynix Inc., saw their operating profits surge more than 80 percent but invested only 10 percent of them on research and development. Accordingly, some point out that they are neglecting to promote their future growth engines despite the improvement in sales performance.
According to the Financial Supervisory Service (FSS) on April 3, a combined amount of R&D investments by major subsidiaries of South Korea’s four leading business groups – Samsung Electronics, Hyundai Motor, SK Hynix and LG Electronics – stood at 25.83 trillion won (US$24.46 billion), up 11.6 percent from a year earlier.
By company, Samsung Electronics made a 16.81 trillion won (US$15.91 billion) R&D investment mainly on televisions and semiconductors. The figure increased 13.6 percent from the same period at the previous year. By sector, televisions and displays had the most research projects with 12 out of a total of 19 research projects last year, followed by semiconductors with 7 and vacuums with 1.
Hyundai Motor also increased its R&D investment 5.9 percent to 2.5 trillion won (US$2.37 billion). The company mainly invested on the development of autonomous and environmentally friendly car technologies, including telematics signal analysis and idle stop & go (ISG) system optimized batteries.
SK Hynix spent 2.49 trillion won (US$2.36 billion) on R&D, showing an 18.5 percent growth. The company mostly focused on securing NAND flash technologies.
LG Electronics expanded R&D investment 3.9 percent to 4.03 trillion won (US$3.82 billion) compared to the previous year. The company carried out R&D projects to develop technologies related to televisions, washing machines and vacuums as well as self-driving car components.
However, market experts say that these companies are too passive in making R&D investment compared to the growth of sales and operating profits last year. In particular, Samsung Electronics, SK Hynix and Samsung Electronics saw their operating profits grow a whopping 83.5 percent, 318.8 percent and 84.5 percent, respectively, but the increase in their R&D investments far fell short of their performance. The ratio of sales to R&D investments of Samsung Electronics dropped 7.3 percent in 2016 to 7 percent in 2017, while that of SK Hynix decreased 12.2 percent to 8.3 percent and LG Electronics from 7 percent to 6.6 percent over the same period.
Hyundai Motor was the only firm that showed a higher increase in R&D investments than a growth of sales and operating profits. The company’s operating profits decreased 11.9 percent but its R&D investments increased 5.9 percent.