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Large Korean Companies Increase R&D Investment despite Lower Sales
R&D Spending Grows 4 Tri. Won by Sept.
Large Korean Companies Increase R&D Investment despite Lower Sales
  • By Jung Min-hee
  • December 26, 2019, 09:39
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Large Korean conglomerates increased R&D spending this year despite a decline in sales.

Large Korean companies increased investment in research and development (R&D) by close to 4 trillion won this year compared to a year ago despite declines in sales. The share of R&D spending in sales rose 0.34 percentage point to exceed 3 percent.

Industry tracker CEO Score released a report on Dec. 25 that the aggregate investments of the 211 firms that belong to the country’s top 500 companies and disclose their R&D expenditures amounted to 39.23 trillion won for the three quarters of the year. It was up 3.99 trillion won (11.3 percent) from 35.24 trillion won recorded during the same period of last year.

The increase reflects the aggressive strategy of these companies to secure future growth engines through R&D investment. Sales of the 500 major companies dropped 10.66 trillion won (0.8 percent) from 1,265.29 trillion won to 1,254.96 trillion won during the same period.

Accordingly, the share of R&D spending in sales rose 0.34 percentage point from 2.79 percent to 3.13 percent just in a year.

Naver Corp., the country’s largest internet portal operator, ranked first among the 500 companies in terms of R&D-to-sales ratio. It invested 1.25 trillion won in R&D, 25.96 percent of its 4.81 trillion won sales.

Last year, the company ranked second with 25.23 percent following pharmaceutical firm Celltrion Inc., but its ratio grew by 0.73 percentage point in a year. Celltrion also gained 0.06 percentage point from 25.57 percent recorded last year, but the increase was smaller than that of Naver, so its ranking slipped to second place. The pharmaceutical firm invested 191.2 billion won in R&D.

The other top 10 companies included Netmarble (20.48 percent), Hanmi Pharm (19.04 percent), NCSoft (18.76 percent), Kakao (15.45 percent), Daewoong Pharm (13.27 percent), ChongKunDang (12.19 percent), SK Hynix (11.60 percent), and Green Cross (10.55 percent). LG Display posted a double-digit figure of 10.16 percent.

Samsung Electronics, the largest conglomerate in the country, ranked 16th with 8.97 percent. It invested 15.29 trillion won in R&D on sales of 170.52 trillion won.

By industry, pharmaceuticals are the only one industry to exceed 10 percent with 13.16 percent, followed by IT electrical and electronics (8.40 percent), service (6.7 percent), auto and auto parts (2.72 percent), and shipbuilding/machinery/facility (2.41 percent). The ratio of daily necessities (1.5 percent) and communications (1.27 percent) stood at the range of 1 percent. At less than 1 percent were petrochemistry (0.77 percent), public enterprise (0.74 percent), construction and construction material (0.71 percent), food and beverage (0.7 percent), steel (0.64 percent), transportation (0.28 percent), distribution (0.14 percent), trading company (0.06 percent), and energy (0.05 percent).

Samsung Electronics was the largest R&D investor in the country. Its cumulative investment during the third quarter of the year totaled 15.29 trillion won, up 14.6 percent from the same period. It was followed by LG Electronics (3.26 trillion won), SK Hynix (2.33 trillion won), Hyundai Motor (1.88 trillion won), LG Display (1.73 trillion won), Naver (1.25 trillion won), and Kia Motors (1.17 trillion won).