Samsung, LG set up contingency plans for plant operations in Russia

[Photo provided by Samsung Electronics Co.]

South Korea’s two biggest electronics giants Samsung Electronics and LG Electronics have set up contingency plans for their electronics manufacturing plant operations in Russia in the event of the United States’ economic sanctions against Russia’s possible invasion of Ukraine.

Amid the growing fears for Russia’s invasion of Ukraine, the Biden administration is said to be preparing to impose sanctions against Russia in response to the latter’s real attack. Currently, it is highly likely that the U.S. would ban exports of semiconductor items to Russia, much like the export rule that was imposed on Huawei in 2020. Once the sanctions are imposed, U.S. companies and Russia will no longer be able to engage in direct transactions, and any non-U.S. company that uses U.S. semiconductor technology or equipment must obtain U.S. licenses before exporting its products to Russia.

When the U.S. Department of Commerce began regulating semiconductor exports to Huawei in May 2020, domestic semiconductor companies such as Samsung Electronics and SK hynix suffered losses.

Any direct damage from the U.S. government's semiconductor sanctions against Russia would be limited, considering that Russia accounts for a mere 1 percent of Korean companies’ semiconductor exports. But as use of semiconductors in electronics is growing, Korean appliance manufacturing giants could be hit by production disruptions at their factories in Russia and a decline in sales in not only Russia but also the Commonwealth of Independent States (CIS).

Samsung Electronics and LG Electronics currently operate LCD-TV and home appliances manufacturing plants in Russia's Kaluga region and Moscow, respectively.

[Photo provided by LG Electronics Inc.]

Samsung Electronics and LG Electronics are currently vying for the top spot in the market share for washing machines and refrigerators in Russia. LG Electronics has even launched the 'LG Objet Collection' in Russia in November last year as part of its efforts to expand its presence in the market.

If semiconductor restrictions are expanded to include smartphones, Samsung Electronics could be at a disadvantage compared to its rival Xiaomi Inc., a Chinese consumer electronics company, as its exports will be blocked.

Samsung Electronics’ combined sales in Russia and CIS nations were about 4 trillion won ($3.3 billion) last year. LG Electronics recorded sales of 1.4 trillion won in the CIS region until the third quarter last year.

Shares of Samsung Electronics closed at 73,000 won, down 1.35 percent while shares of LG Electronics closed at 125,000 won, down 2.34 percent on Monday.

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