Korea‘s top company shows 2.5 times earnings gap against global leader

[Courtesy of The Federation of Korean Industries]

The profitability of South Korea’s top companies in various industry sectors lags behind that of global leaders, a study showed on Wednesday.

According to findings released by the Federation of Korean Industries (FKI), the average net profit margin of the top global company by market capitalization is 2.5 times higher than that of the top Korean company.

The gap widens to 7.3 times in the semiconductor sector.

The FKI conducted a comparative analysis of the profitability among 137 companies in different industries based on the Global Industry Classification Standard.

Market capitalization figures are as of the end of last year, while profitability data is for the year 2022.

The FKI identified operating expenses such as selling, general, and administrative expenses, as well as research and development expenses, as the main reasons for the profitability gap.

It also speculated that the interest and tax burdens on Korean companies have disproportionately increased compared to global firms.

In key industries, the disparity in profitability between global and domestic leaders was most pronounced in the semiconductor sector.

Nvidia Corp. and SK hynix Inc. recorded net profit margins of 36.2 percent and 5 percent, respectively, showing a gap of 7.3 times.

This was followed by disparities of 6.2 times in home appliances and 4.3 times in petroleum products.

Samsung Electronics Co., categorized in the electronics industry, showed a relatively smaller gap of 1.4 times compared to the global leader.

Samsung Electronics posted a net profit margin of 18.1 percent, compared to Apple Inc.’s 25.3 percent.