Korea’s big companies post 70% lower Q4 profit on semiconductor slump

Samsung Electronics building in Seocho District, Seoul [Photo by Lee Seung-hwan]

Large corporations saw almost 70 percent drop in their operating profit in the fourth quarter last year mainly due to a slump in semiconductors that led to poor performances at Samsung Electronics Co. and at SK hynix Inc., according to data from business data tracker CEO Score on Wednesday.

The CEO Score data showed that 262 companies among the top 500 companies, posted 662.4 trillion won ($507.2 billion) in sales in the fourth quarter, an 11.3 percent rise from the same period in 2021. However, operating profit among those companies fell 69.1 percent to 12.99 trillion won.

The data were compiled based on those 262 companies, whose performance data were available.

Operating profit at those companies, as a whole, topped almost 50 trillion won in the first half of 2022, but fell by 34.2 percent to 34.5 trillion won in the third quarter, with an even larger fall in the fourth quarter, as the global economic downturn was more pronounced in the second half of the year.

By industry, 13 sectors out of 19 saw a drop in operating profits. Information and technology (IT) & electronics businesses saw a 85.4 percent year-on-year drop in their fourth quarter operating profit to 3.04 trillion won. The worldwide economic slowdown appears to have slowed sales of semiconductors, home appliances and mobile phones, which are all Korea’s major export items.

During the same period, operating losses at state-owned companies widened to 9.8 trillion won from 4.3 trillion won a year ago. Sales grew by 13.2 trillion won over the past year. The contrasting directions between the figures are attributed to higher profits among utility companies driven by price hikes in energy and raw materials, but delays in proposed rate hikes for power and gas bills adversely affected Korea Electric Power Corp.’s earnings, CEO Score said.

Other industries, such as steel, petrochemical, and transport saw more than a trillion won drop in operating profit.

SK hynix headquarters in Icheon city, Gyeonggi Province [Photo by Yonhap]

Meanwhile, automobiles and the auto parts industry saw a steep surge in their operating profit, posting 7.52 trillion won in the fourth quarter. That figure grew by 119.3 percent year-on-year.

Shipbuilding, machinery and facilities all posted operating profit during the same period, largely driven by sound orders in the shipbuilding industry.

Food & beverages, and energy industries also saw more than 100 billion won increase in their operating profit.

By company, Samsung Electronics was hit hardest with a 68.9 percent year-on-year drop in its fourth quarter operating profit to 4.4 trillion won from 13.9 trillion won. SK hynix posted a 1.9 trillion won operating loss in the fourth quarter, mainly due to a sharp fall in semiconductor demand. The company’s losses may widen in the first half of this year as semiconductor prices remain weak.

Companies that saw more than a trillion won fall in their operating profit include KEPCO., POSCO Holdings Inc., HMM Co., LG Display Co. and Hyundai Steel Co.

Meanwhile, Hyundai Motor and Kia were the only two large companies that saw an increase bigger than one trillion won in their operating profits during the period driven by the popularity of environmentally friendly cars and sports utility vehicles.

Hyundai Motor posted 3.4 trillion won in the fourth-quarter operating profit, up 119.6 percent year-on-year, from 1.5 trillion won. Kia Corp. saw a 123.3 percent year-on-year surge to 2.6 trillion won in operating profit for the same period.

Companies that saw more than a 100 billion won increase in their operating profit during the period include Korea Gas Corp., Hyundai Heavy Industries Co., Samsung Life Insurance Co., Samsung C&T Corp. and Samsung SDI Co.

The total net income of the 262 companies fell by 20.8 percent to 23.01 trillion won during the same period, compared to 29.07 trillion won in the fourth quarter of 2021.