Korean conglomerates’ 2022 R&D spending up 14% despite smaller profit

[Photo provided by Samsung Electronics]

Korea’s largest conglomerates increased their research and development (R&D) investment by 14 percent last year, despite more than a 27 percent drop in their net profit due to the economic slowdown.

R&D investment at 231 companies topped 68.41 trillion won last year, an increase of 8.4 trillion won ($6.27 billion) year before, according to analysis of R&D investment and performance among conglomerates released by business data tracker CEO Score on Wednesday. The data were based on disclosed business reports over the past three consecutive years and financial institutions were excluded from the data.

Information technology (IT) and artificial intelligence (AI) were the biggest recipients of new R&D money. Samsung SDI Co. and Kakao Corp. both exceeded 1 trillion won in R&D for the first time last year.

Operating profit at these companies reached 123.68 trillion won and net profit came in at 106.16 trillion won, both down 25.4 percent and 27.1 percent, respectively, from a year before.

Despite the downtrend in their profit, attributed to the global economic slowdown and to weak exports, the conglomerates increased their investment in R&D, putting money into their future growth.

Among the 231 companies, 173 of them increased their R&D spending last year and only 58 companies cut their R&D spending.

By investment amount, the top 10 companies were Samsung Electronics Co., SK hynix Inc., LG Electronics Inc., Hyundai Motor Co., LG Display Co., Kia Corp., Naver Corp., LG Chem Ltd., Hyundai Mobis Co. and Samsung SDI Co. These companies have been in the top 10 in terms of R&D for the past three years. They spent a combined 47.84 trillion won last year, accounting for about 70 percent of the total R&D spending measured in the dataset.

Netmarble Corp. headquarters in Seoul [Courtesy of Netmarble]

Samsung Electronics invested 24.93 trillion won in R&D last year, accounting for 36.4 percent of total spending. The company saw a 16 percent fall in its operating profits last year as the chip cycle entered a downturn on top of the global economic slowdown, but still expanded its R&D investment by 10.3 percent.

SK Hynix also invested 4.91 trillion won, up 21.3 percent from a year before amid an industry-wide recession.

LG Electronics invested 4.04 trillion won, up 12.0 percent, and Hyundai Motor 3.34 trillion won, up 7.8 percent. LG Display, Kia and Naver followed suit, with 2.43 trillion won, 2.16 trillion won and 1.81 trillion won in R&D investment, respectively.

Companies with the largest R&D investment relative to their sales last year were Netmarble Corp. at 32.1 percent and Naver at 22.0 percent, followed by Krafton Inc., NCsoft Corp. and Celltrion Inc., with 21.8 percent, 18.4 percent and 18.1 percent, respectively. Most companies in this category were in high-growth industries, such as video games, pharmaceuticals and biotechnology.

Among them, Naver and Netmarble both invested more than 20 percent of their sales into R&D in each of the past three years. In particular, Netmarble increased its R&D spending by more than 50 percent from a year before, investing one-third of its sales into R&D. Kakao increased its R&D spending by 33.6 percent, to 1.02 trillion won, from 764.5 billion won in 2021, exceeding the 1 trillion mark for the first time.

By industry, IT and electronics spent 40.8 trillion won in R&D, the largest amount, followed by automobiles and parts at 8.95 trillion won, services at 5.31 trillion won, petrochemicals at 3.83 trillion won and shipbuilding, machinery and equipment at 2.55 trillion won.