2023 Business Top 10 News

In 2023, Korea witnessed a business landscape undergoing a profound technological and cultural shift fueled by AI integration. Economic dynamics led young Koreans to favor home-packed meals amidst price surges and market fluctuations.

━ 1. Korean tech giants capitalize on global AI boom

Samsung's generative AI model Gauss is presented at the SDC23 Korea in November. [YONHAP]

Korean tech giants unveiled significant investments and introduced new services powered by generative AI, aiming to capitalize on the global AI boom sparked by OpenAI's ChatGPT.

Samsung Electronics unveiled its own generative AI model, Gauss, in November, which is expected to be applied to a wide variety of Samsung products including Galaxy smartphones.

In its initial phase, the platform will primarily be used for internal purposes, functioning as a tool to assist with tasks like email composition and summarizing meeting notes.

Samsung is also working to develop an AI chip partnership with Naver.

KT, Korea's major mobile carrier, vowed to pour 7 trillion won ($5.4 billion) into AI for the next five years and diversify its AI-related business portfolio to include robots, health care and education. It is targeting 1.3 trillion won in revenue from AI in 2025.

SK Telecom, another prominent mobile carrier in Korea, has committed to tripling its investment in AI over the next five years, aiming to attain revenue exceeding 25 trillion won from AI-related ventures. As part of this ambition, its A. service, conceived as an AI assistant, offers features such as call summarization and simultaneous translation in four different languages.

Naver and LG have rolled out significant updates to their large-language models (LLMs) – HyperCLOVA X and Exaone – as they vie to challenge ChatGPT's dominance in the market. HyperCLOVA X boasts proficiency in the Korean language, while Exaone focuses on specific sectors such as drug development and patent verifications.

━ 2. Inflation falls gradually as government cracks down on prices

Customers shop for food at a supermarket in Seoul on Dec. 17. [YONHAP]

Inflation grew 3.3 percent in November, down from 5 percent from a year earlier. Inflation has generally been falling since it peaked at 6.3 percent last July.

The growth fell as low as 2.3 percent in July 2023 but climbed back to above 3 percent in the following month amid strong agricultural product prices led by heavy rainfall and extreme heat waves.

The Bank of Korea, in November, projected that Korea’s inflation would average 3.6 percent this year and 2.6 percent in 2024, an uptick from its August estimates of 3.5 percent and 2.4 percent, respectively.

Inflation is expected to slow in coming months, but the point at which the rate will reach the 2 percent target remains uncertain, the Korean central bank said in a report in December. Potential confounding variables include volatility in oil prices and foreign exchange rates, as well as potential price adjustments in the beginning of 2024, including for public utility fees.

In response to the numbers, the government has extended its tax cuts on fuel consumption, announced plans to lower taxes for domestically produced alcoholic beverages and pressured food companies to cooperate in taming inflation.

It also took measures to curb ‘shrinkflation,’ the practice of reducing the size or quantity of a product while maintaining its original price.

The government announced in December that it would require manufacturers and distributors of food and daily necessities to inform customers of any changes in content, size or ingredients of the products they sell.

━ 3. Ban on short selling amid global bank misconduct

Electronic display boards at the Korea Exchange in wetsern Seoul show Kospi and Kosdaq on Nov. 6, the first day after the financial regulators reinstated the ban on short selling of stocks. [NEWS1]

Korea’s financial regulators reinstated a full ban on short selling of all stocks from November after global investment banks were found to have committed illegal short selling in the country.

The ban, which will be in place through June next year, was the fourth of its kind after the 2008 financial crisis, the 2011 European debt crisis and the Covid-19 outbreak in 2020. The authorities had partially lifted the ban on large-cap stocks from the Kospi 200 and Kosdaq 150 before the latest ban.

The Financial Supervisory Service (FSS) said it will bring up measures to prevent illegal short selling and level the playing field between retail investors and foreign and institutional investors.

The Financial Services Commission said last month that it will ease trading conditions for retail short sellers and make such trades more challenging for institutional investors. The measures included the restriction of institutional investors’ holding period for short-sold stocks from an unlimited length to 90 days, which can be extended following a regulatory report to the FSS.

Critics of the latest ban argued the intention behind the restriction was to soothe retail investors, who have pointed out short selling as a primary reason for Korea’s weak stock market, ahead of the country’s general election scheduled for April next year.

━ 4. As IRA looms, Korea's battery makers rush to the U.S.

U.S. President Joe Biden speaks before signing the Inflation Reduction Act in the White House in August 2022. [EPA/YONHAP]

The U.S. government, in early December, announced specific guidelines around the Inflation Reduction Act (IRA) restricting the use of battery components and critical minerals from China, stretching its influence on Korean battery makers.

To qualify for up to $7,500 in tax credits under the proposed guidelines, an eligible clean vehicle may not contain battery components that are manufactured or assembled in China. Starting in 2025, a vehicle may also not contain critical minerals that are extracted, processed, or recycled in the country.

Battery makers who are more than 25 percent owned by a Chinese company also cannot receive U.S. subsidies.

With just a few weeks until the law takes effect, Korea's major battery makers such as LG Energy Solution, Samsung SDI and SK On as well as materials firms like EcoPro and Posco Future M, are now in limbo. The majority of those companies have established 51:49 joint ventures with Chinese companies for key battery materials such as nickel, cathodes and battery precursors.

Korean battery makers, as a consequence, are rushing to build plants in the United States in an attempt to qualify for the IRA. They have funneled a total of 45 trillion won ($35 billion) to the United States through independent factories and joint ventures with global automakers.

━ 5. Samsung, SK hynix suffer $16 billion loss in chip business

Samsung Electronics' chip plant located in Pyeongtaek, Gyeonggi [YONHAP]

Samsung Electronics and SK hynix incurred a combined loss of more than 21 trillion won ($16.1 billion) in their chip businesses, primarily attributed to the cyclical downturn in the semiconductor industry in 2023.

The third quarter revenue of Samsung Electronics, the world's No. 1 memory chipmaker, plunged 77.6 percent year-on-year as its chip division, a cash cow for the conglomerate, continued to reel from a global supply glut.

Samsung's chip business accumulated an operating loss of 12.7 trillion won in the first three quarters of this year.

The oversupply of memory chips began to impede the global semiconductor industry from the end of 2022, as the demand for electronic devices, particularly smartphones and laptops, did not rebound even after the pandemic due to ongoing economic uncertainties.

SK hynix, a global top-tier memory chipmaker, was also unable to escape the industry slowdown.

SK hynix's third quarter revenue plunged by 17 percent year-on-year in 2023. It accumulated 8.1 trillion won of operating loss in the first three quarters of this year.

On the bright side, there are signs of the memory chip industry recovering, thanks to surging demand for advanced memory chips like high-bandwidth memory chips for AI applications. The production cuts implemented in the first half of the year have helped control inventory and stabilize price declines.

━ 6. Korea's arms contractors strike major deals overseas

KF-21 Boramae, the country's first domestically developed fighter jet, flies over Seoul Airport in Seongnam, Gyeonggi, during a test flight held a day before the six-day Seoul International Aerospace & Defense Exhibition (ADEX) 2023 officially kicks off. [NEWS1]

Korea's defense contractors struck major multibillion-dollar arms contracts with Poland and Malaysia in 2023, helping the country claim a place as one of the world's key weapons suppliers amid rising geopolitical tensions around the globe.

The Defense Ministry estimated the total value of arms deals secured this year at around $13 to $14 billion, which would make Korea one of the world's 10 largest arms exporters for the second year in a row.

The estimate would be a decrease from last year's figure of $17.3 billion, but the number of importers also increased to 12 from last year's four, with the addition of countries including the United Arab Emirates, Saudi Arabia and Finland.

Hanwha Aerospace’s Australian subsidiary inked a 3.2 trillion won ($2.4-billion) agreement with Australia's Capability Acquisition and Sustainment Group, the country's arms procurement agency, in early December, sealing the sale of 129 Redback infantry fighting vehicles to Australia. The Redbacks will be delivered by 2028.

The arms supplier also bagged a 3.45 trillion won executive contract to supply Poland with 152 K-9 self-propelled howitzers.

The agreement is the second round of orders following a larger framework agreement that Hanwha and Poland reached in July 2022, which secured the supply of 672 K-9 howitzers and 288 Chunmoo multiple rocket launchers in total. Poland placed the first round of orders last August.

KAI signed a $920 million deal with the Royal Malaysian Air Force in May to deliver 18 FA-50M light combat aircraft. The first delivery is to be made in 2026.

Korea’s defense exports were valued at around $3 billion per year from 2010 to 2020, but the figure has spiked since late 2021 and reached a record $17.3 billion in 2022.

━ 7. Ramyeon exports hit record highs as K-food booms abroad

Videos of foreigners trying Trader Joe's new frozen gimbap product went viral on social media. [SCREEN CAPTURE]

The unprecedented international popularity of K-food drove record-breaking exports of ramyeon, gim (dried seaweed), and cooked rice, causing shortages of gimbap in supermarkets.

Trader Joe's, a major U.S. supermarket, began selling frozen gimbap from the Korean company Olgot this year. The product went viral on social media and rapidly sold out.

Driven by robust overseas demand for gimbap, Korea's exports of gim and cooked rice hit historic highs during the first 10 months of this year. Gim exports increased by 20.4 percent to reach $670 million, while exports of cooked rice products surged by 29.9 percent during the same period.

Ramyeon exports also hit a record high, totaling $785 million in the January-October period, and increased for their ninth consecutive year. The momentum has been partially attributed to the success of the movie “Parasite” (2019), which featured the noodle dish jjapaguri, at the 2020 Academy Awards.

━ 8. Kakao's acquisition of SM Entertainment leads to trouble

Kakao founder Kim Beom-su speaks at the company meeting held in Kakao's headquarters in Seongnam, Gyeonggi, on Dec. 11. [YONHAP]

Korean tech giant Kakao acquired a 39.9 percent stake in K-pop powerhouse SM Entertainment for $963 million in March. The deal aimed to strengthen the company's entertainment sector, but managed to put Kakao into a downward spiral due to its engagement in illegal stock manipulation during the purchase process. Kakao and K-pop agency HYBE behind BTS were locked in a takeover bid over SM Entertainment earlier this year, each opting to buy up more shares of SM in tender offers.

Kakao came out as the winner by becoming SM Entertainment’s largest shareholder with a combined holding of 39.9 percent — but it came at a price.

The allegation was triggered by HYBE requesting Korea’s financial regulator to investigate Kakao’s “abnormal” purchase of SM Entertainment shares in February.

The Financial Supervisory Service (FSS) began probing Kakao’s alleged stock manipulation in its purchase of SM Entertainment shares, with the speculation that it artificially injected 240 billion won into the market to drive the price of SM shares higher than those of its competitor HYBE.

FSS raided the offices of Kakao founder Kim Beom-su and Kakao’s Pangyo headquarters. Kim and Kakao’s top executives were referred to prosecutors for stock manipulation while its chief investment officer Bae Jae-hyun is in custody under the same charges.

The company's inner frictions were recently lambasted by a Kakao executive in a Facebook post, slamming the company for opaque decision-making processes related to some of its real estate projects and its corporate golf membership program.

Amid outlining numerous scandals, Kakao founder Kim Beom-su K vouched that he would revamp company management, stating they would "change the name of Kakao corporation" to create a new Kakao. The move started with the naming of a new CEO to lead the company, a 48-year-old Kakao Ventures head Chung Shin-a.

Chung is the first female Kakao boss since the company was established in 2010. The move comes as part of Kakao founder Kim Beom-su's promise to completely overhaul Kakao’s management,

The company has formed an external autonomous committee to oversee management decisions from Kakao subsidiaries, having the authority to directly investigate what it deems as risks and review subsidiaries’ management procedures.

━ 9. Viral superconductor claim shot down by academics

An image of LK-99, a compound that a group of Korean researchers claimed had superconductivity, provided by Kim Hyun-tak, one of the co-authors of the study [SCREEN CAPTURE]

Manuscripts in which a group of Korean researchers claimed to have created the world's first room-temperature, ambient-pressure superconductor were made public in July but later verified to be false.

Author Lee Suk-bae and team of five other contributors claimed that a compound of lead, copper, phosphorous and oxygen, dubbed LK-99, had exhibited superconductivity at room temperature and under ambient atmospheric pressure in the self-archived papers.

Such a material has long been a holy grail in science and technology circles, as an electric current could theoretically pass through it without losing energy. If created, it could bring fundamental changes to every aspect of electricity, from transportation to power generation, and significantly boost its efficiency.

The release of the papers caused quite a buzz in the academic community. Social media erupted, and the stock market went on a roller-coaster ride.

But both research institutes and individual scientists around the world attempted to verify the Korean team's manuscripts and soon came forward to debunk the claim, stating that LK-99 had not exhibited superconductivity, even at very low temperatures.

The Korean Society of Superconductivity and Cryogenics also launched a research team to verify the superconductivity claims in August, and announced on Dec. 13 that “there is no evidence at all proving that [LK-99] is a room-temperature, ambient-pressure superconductor.”

The fleeting frenzy around the potential superconductor generated quite a bit of drama, including feuds among members of the research team over their respective contributions to the project.

Quantum Energy Research Centre, a Seoul-based, privately-held corporation behind the LK-99 claim, also had to shut down its website for falsely naming local companies and research institutes such as Samsung SDI, LG Innotek and Posco as partners.

━ 10. Video of Tsingtao employee peeing in brewery decimates importer's sale

A video seemingly shows an employee urinating in a Tsingtao Brewery factory in China [SCREEN CAPTURE]

A video of an employee at a Tsingtao brewery in Shandong Province, China, appearing to be urinating in a malt tank circulated online. The incident, which took place in October, has sent shock waves through the market, significantly impacting both domestic sales and import volume of Tsingtao beer.

Sales of Tsingtao beer in major convenience stores declined by more than 50 percent. Simultaneously, the import volume of Chinese beer into the country dropped 40 percent, totaling a mere 2,281 tons compared to the previous year.

BK, Tsingtao's domestic importer, clarified that beer produced in the factory where the incident occurred does not enter the domestic market for local consumption. Consumer confidence has taken a hit, despite that clarification, prompting BK to implement a voluntary retirement program for all of its employees.

BY JIN EUN-SOO, JIN MIN-JI, SARAH CHEA, LEE JAE-LIM, SEO JI-EUN, SHIN HA-NEE, KIM JU-YEON [jin.eunjsoo@joongang.co.kr]