Deteriorating Competitiveness
Exchange rate fluctuations are worrying IT equipment importers. The stagnant IT market and exchange rate volatility are negatively affecting their businesses.
According to sources in the foreign exchange market and the IT industry on Nov. 27, the won-dollar rate, which was 1,007 won per dollar in July, soared to 1,150 won on Nov. 20. The ratio is the highest-ever since August 2013.
An increase in the exchange rate is a setback for HP Korea, IBM Korea, and EMC Korea, which import and sell enterprise-oriented servers, storage, and network equipment. But it is also a setback for foreign IT companies, which sell consumer products like PCs, laptops, and tablet PCs. When products are imported, foreign exchange losses occur, but companies cannot afford to raise prices in order to reduce losses. Hence, they inevitably bear those losses.
An official at a foreign storage company said, “Compared to this summer, the won-dollar rate increased more than 100 won. So, our margin decreased more than 10 percent.” The official added, “In November alone, foreign exchange losses amount to 7 to 8 million won [US$6,334 to $7,238]. But it is not easy for us to raise prices, since we will lose our price competitiveness.”
A representative of HP Korea also remarked, “We are using a foreign exchange hedge to reduce foreign exchange losses, but it can cover only 10 percent of losses.” The representative added, “Compared to last year's summer, our margin apparently shrank more than 10 percent.”