South Korea’s top 10 business groups have increased their investment in research and development (R&D) by 10 percent on average in the first half of this year, according to data released by the Financial Supervisory Service.
The data show that the total amount of R&D investments by 69 listed subsidiaries of the nation’s top 10 business groups came to 18.31 trillion won (US$16.31 billion) in the first half, up 8.3 percent, or 1.41 trillion won (US$1.25 billion), from a year earlier.
By group, Hanwha showed the highest increase with 45.2 percent, followed by POSCO with 21.5 percent, Samsung with 10.5 percent and SK with 9.7 percent. The four conglomerates had a higher growth rate than the average. Only GS Group cut down its investment compared to the first half of last year.
In particular, Samsung Group made a 9.49 trillion won (US$8.46 billion) investment in R&D in the first half alone. Samsung Electronics Co. increased its R&D investment by 848.1 billion won (US$755.55 million) to 8.78 trillion won (US$7.83 billion) over the same period, while Samsung Electro-Mechanics Co. and Samsung SDI Co. expanded R&D spending by two-digit figures.
Hyundai Motor Co. also expanded its investments as much as 5 percent to 2.39 trillion won (US$2.13 billion) despite poor performance. The group’s three car subsidiaries – Hyundai Motor, Kia Motors Corp. and Hyundai Mobis Co. – all increased their R&D spending by more than 5 percent, while and Hyundai Rotem Co., which specializes in railway train production, showed a whopping 18 percent growth.
For SK Group, its major subsidiary, SK Hynix Inc., invested 1.29 trillion won (US$1.15 billion) in R&D, up 11.2 percent from the previous year. Its other major subsidiaries, SK Telecom Co. and SK Innovation Co., also expanded their investments by 3.9 percent and 15.1 percent, respectively. SK Holdings Co., which leads new growth businesses, such as biotechnology and semiconductor materials, showed a dramatic growth in investment.
For LG Group, LG Chem Ltd., LG Hausys Ltd. and LG Uplus Corp. greatly expanded their investments. On the other hand, LG Electronics Inc., LG Household & Healthcare Ltd. and LG Innotek Co. slightly reduced their investments.
Other major business groups that increased R&D spending includes POSCO Co., which seeks to diversify its business portfolio into non-steel sectors, Hanwha Corp., which promotes defense, machinery and solar power as its next growth engines, and Hyundai Heavy Industries Co., which seeks to improve the business competitiveness of each sector after turning into a holding company.
Only GS decreased its investment by 4 billion won (US$3.56 million) but this is largely due to the fact that the group has a high share in the oil refining and chemical business, which mainly concentrates on facility investment, and the distribution business, which requires a low R&D investment.
Major conglomerates have recently made a large R&D investment because they are focusing on promoting new businesses related to the Fourth Industrial Revolution, including artificial intelligence (AI), robot, 5G and electric and autonomous vehicles, to keep up with the rapidly changing market environment.
Samsung Electronics has recently announced a large-scale investment plan worth 180 trillion won (US$160.36 billion) for future growth engines, such as AI, 5G communications, biotechnology and application component, over the next three years. Hyundai Motor has also decided to invest 23 trillion won (US$20.49 billion) in robot and AI over the next five years.
In addition, SK has announced to inject 80 trillion won (US$71.27 billion) in semiconductors, materials and next-generation information communication technology (ICT) for the next three years. LG also said earlier this year that it would make a 19 trillion won (US$16.93 billion) investment in electric vehicle component and self-driving sensors over the next one year, showing a strong will to promote its future growth engines.