Korean companies’ sales from China subsidiaries drops sharply since 2016

Hyundai Motor factory in Beijing, China [Courtesy of Hyundai Motor Group]

South Korea’s major companies, such as Hyundai Motor Co. and Samsung Electronics Co., have seen a significant decline in revenue at their Chinese operations since the Chinese government began exerting pressure on Korean businesses since 2016.

According to a study, the combined revenue of these companies’ Chinese subsidiaries has dropped by about 13 percent over the past six years. However, when excluding the revenue from the battery and semiconductor sectors, the decline was about 40 percent.

CEO Score, a corporate data research institute, conducted the analysis on the annual revenue of 113 Korean companies’ Chinese production subsidiaries, which were disclosed among the top 500 Korean companies. The analysis revealed that the total combined revenue of these companies in the previous year amounted to 111.42 trillion won ($85.5 billion), down by 13.1 percent versus 127.73 trillion won in 2016.

Excluding the companies in the battery and semiconductor sectors, which have witnessed a rapid increase in Chinese revenue in recent years, the revenue from Korean companies’ Chinese production subsidiaries has shrunk by 37.3 percent, from 117.23 trillion won in 2016 to 73.45 trillion won last year.

Among the companies, Hyundai Motor Group’s subsidiary in China, Beijing Hyundai Motor, experienced the most significant decline in revenue. Its revenue plummeted to 4.9 trillion won last year from 20.13 trillion won in 2016, marking a staggering 75.7 percent decrease. Among Korean companies, Hyundai Motor Group’s Chinese subsidiary is the only one with a revenue decline exceeding 10 trillion won.

During the same period, Kia Corp.’s Chinese subsidiary, Jiangsu Yueda Kia Motor, also witnessed a steep drop in revenue, plunging by 80.8 percent to 1.88 trillion won from 9.8 trillion won.

This decline also adversely affected domestic parts manufacturers. Last year, Hyundai Mobis Co.’s revenue from its Chinese production subsidiary fell by 80.8 percent to 1.7 trillion won compared with 2016. Other Hyundai Motor suppliers such as Hyundai Transys dropped 55.1 percent, Hyundai WIA 62.7 percent, Sungwoo Hitech 71.4 percent and Hyundai KEFICO 74.3 percent.

Samsung Electronics, due to the contraction of its smartphone and home appliance divisions in China, saw its revenue from Chinese production fall by 43.5 percent to 9.68 trillion won last year from 17.12 trillion won in 2016. The closure of its Huizhou factory in 2021 was directly attributed to the revenue decline.

Samsung Display, a subsidiary of Samsung Group, also experienced a sharp decline in revenue from its Chinese subsidiary, falling by 49.9 percent to 5.4 trillion won last year from 10.78 trillion won in 2016.

While Korean automotive and electronics giants, which previously showed strong performance in China, have lost their positions in the market, battery and semiconductor companies have been recording growth due to market expansion within China. Notably, LG Energy Solution Ltd., Samsung SDI Co., and SK innovation Co., the three major Korean battery manufacturers, have achieved record results in China.

LG Energy Solution’s revenue from its Chinese subsidiary reached 12.85 trillion won last year, marking a 431.6 percent jump compared with 2016. Similarly, Samsung SDI’s revenue from its Chinese subsidiary expanded by 483.5 percent over the past six years, to 5.43 trillion won from 929.8 billion won. Samsung SDI’s Tianjin production subsidiary recorded a revenue growth rate of over 2,500 percent. SK on, which established a new subsidiary in China in 2019, also recorded revenue of 2.1 trillion won last year.

Samsung China Semiconductor (SCS), another Samsung subsidiary in Xian, experienced a 133.1 percent increase in revenue, to 9.68 trillion won last year from 4.15 trillion won in 2016. Likewise, SK hynix’s revenue from its Chinese production subsidiary soared by 151.5 percent, to 7.55 trillion won last year from 3 trillion won in 2016.