×

Samsung and Hyundai Issue Rallying Call

Samsung Electronics and Hyundai Motor, South Korea’s two biggest companies by market value, issued a rallying call to staff on Monday and warned of tougher business conditions for 2012 amid the global economic slowdown.

Models show Samsung Electronics Co's Android smartphones during the unveiling ceremony on February 4, 2010 in Seoul, South Korea.
Getty Images
Models show Samsung Electronics Co's Android smartphones during the unveiling ceremony on February 4, 2010 in Seoul, South Korea.

Exporters in Asia’s fourth-largest economy have fared relatively well during recent economic downturns on the back of the weaker won but they face increasing worries about slowing growth due to cooling demand for the country’s cars, electronic equipment and ships.

Samsung Electronics overtook Apple as the world’s largest smartphone maker in the third quarter, but its chips and flat panel businesses are suffering from steep price falls and its new businesses such as LED and solar cells appear to be making little headway. Widening losses from the liquid crystal display business has forced Samsung to buy Sony’s stake in their LCD joint venture.

The company, flagship of South Korea’s biggest conglomerate, is set to face stiffer competition in the fast-growing smartphone market as Nokia launches Windows-based smartphones while Motorola and LG Electronics attempt to win market share with new products.

Lee Kun-hee, chairman of Samsung Electronics, called for more openness and innovation in 2012, in spite of expectations that its sales for 2011 will surpass the record Won154.6tn ($133.7bn) in 2010.

“This year, the slowing economic growth is expected to persist while the ongoing uncertainties surrounding business conditions won’t likely be easily removed,” he said in a New Year speech to employees. “Samsung’s future hinges on new businesses, new products and new technologies. We should make our corporate culture more open, flexible and innovative.”

Hyundai Motor and affiliate Kia Motors, which together form the world’s fifth-largest automaker by sales, will face intensifying competition from Japanese rivals as they recover from production losses caused by last year’s earthquake and tsunami in Japan and Thailand’s floods. Toyota last month forecast a 20 per cent jump in 2012 sales to a record 8.48m vehicles.

The combined group aims to boost global vehicle sales by 6 percent this year to a combined 7m units, a target seen by analysts as conservative as the group has posted double-digit growth in recent years. Hyundai sold 6.6m vehicles in 2011, up 15 per cent from the previous year.

In a letter to staff, Chung Mong-koo, chairman of Hyundai Motor, stressed the importance of improving quality and brand value to continue expanding its market share while the global auto industry braces for slowing growth. “The auto industry in 2012 is expected to show slow growth and intense competition between companies,” he told employees. “We will strengthen quality management we have continuously pursued.”

Analysts expect South Korean companies to start feeling the chilling effects of the global economic slowdown. “It is hard to predict their performance, given many variables, but slowing growth is expected in terms of sales and operating profits amid cooling exports and sluggish domestic demand,” said Moon Jung-up at Daishin Securities.

South Korea’s export growth is expected to slow in 2012 to 6.7 per cent from 19.6 per cent in 2011, according to government forecasts.