Raw material and wage costs rise by double digits for Korea's key exporters

[Photo by Yonhap]

Sharper rise in the cost of imported raw materials than exports of finished goods and higher wages weighed over Korean major exporters in the first half, and the burden could be harder on their income statement in the coming months amid slowed external demand.

According to a half-year disclosure by Samsung Electronics on Friday, the world’s largest chip and smartphone maker spent 58.52 trillion won ($43.7 billion) for the purchase of raw materials for production during the January-June period, up 24.6 percent from a year-ago period.

Out of the key raw materials, the price of mobile application processors (AP) - system on a chip (SoC) that is responsible for helping applications run in a mobile operating system such as Android – shot up 58 percent compared to last year and the price of camera modules by 10 percent. The price of wafers – the basic material for manufacturing semiconductors – jumped 4 percent compared to the previous year.

The average selling price of Samsung Electronics TVs fell 4 percent and memory chips 0.3 percent.

Only smartphone selling price added 9 percent.

Cost of raw materials would likely top last year’s record 103.7 trillion won.

Wage costs also have increased.

[Photo by LG Electronics Inc.]

During the first half, Samsung Electronics spent 15.95 trillion won on salary and retirement benefits, up 14.1 percent from last year. The electronics giant also experienced high labor costs due to the surge in the number of employees and executives. At the end of June, Samsung Electronics reported a total of 117,321 employees, its largest ever.

LG Electronics’ total expenditure on raw materials amounted to 20.7 trillion won in the first half, up 17.8 percent from a year earlier due to the sharp increase in prices of key raw materials for household appliances such as steel, plastic, and copper.

LG Electronics spent 4.92 trillion won on labor costs, an increase of 22.7 percent from last year due to wage growth.

SK hynix saw its raw material and labor costs jump 44.4 percent and 45.4 percent, respectively. The costs gained 31.1 percent and 35.2 percent, respectively, for LG Energy Solutions.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]