Samsung, SK and Other Export Companies Face Currency Emergency... Billions at Risk

Sharp Drop in KRW-USD Exchange Rate Continues Following Biden's US Presidential Election Win
Prolonged Exchange Rate Decline Could Cause Trillions in Foreign Exchange Losses for Korean Exporters

On the 9th, dealers are working in the dealing room of Hana Bank in Euljiro, Seoul. On this day, the KOSPI index started at 2,438.63, up 22.13 points (0.92%) from the previous trading day, and continued its strong performance. The won-dollar exchange rate opened at 1,120.0 won, down 0.4 won. Photo by Moon Honam munonam@

[Asia Economy Reporter Changhwan Lee] #. Export giant Company A held an emergency meeting earlier this month by inviting economists and exchange rate experts with whom it has advisory relationships. This was because the won-dollar exchange rate sharply declined as the likelihood of Joe Biden winning the U.S. presidential election increased, putting exports on alert. The experts predicted that the won-dollar exchange rate could fall to the 1000-won level next year. Company A is struggling to prepare countermeasures such as currency hedging and export diversification in response to the falling won-dollar exchange rate.

Major domestic export giants such as Samsung, SK, Hyundai Motor, and LG have stepped up their exchange rate scenario management in preparation for the "Biden era." Export companies expect the won-dollar exchange rate to continue declining (won appreciating) following the victory of Democratic candidate Joe Biden in the U.S. presidential election.

The sharp rise in the won’s value can be fatal to Korean companies focused on exports. Although it varies by industry, major export products such as semiconductors and automobiles can suffer hundreds of millions of won in foreign exchange losses even if the exchange rate drops by just 10 won.

According to the industry on the 9th, semiconductor companies like Samsung Electronics and SK Hynix are preparing countermeasures by considering exchange rate fluctuations as a major variable in next year’s management plans, as the exchange rate may fall faster than initially expected.

Semiconductors, which account for more than 20% of the country’s exports, are considered the most sensitive item to exchange rate fluctuations. The semiconductor industry estimates that even a drop of several tens of won in the won-dollar exchange rate could reduce annual operating profits by trillions of won.

Automobile companies such as Hyundai and Kia Motors are also busy preparing exchange rate countermeasures. Since it is uncertain how much the won-dollar exchange rate will fall next year, they are reportedly drafting contingency plans considering the worst-case scenarios.

An industry insider said, "Exchange rate declines naturally have a negative impact on the performance of companies that settle payments mainly in dollars," adding, "Since exchange rates are uncontrollable variables, various countermeasures such as export diversification and currency hedging are being devised to minimize damage."

The Biden effect is already appearing in the foreign exchange market. According to the foreign exchange market, the won-dollar exchange rate has plunged by more than 60 won in the past two months as the likelihood of Biden winning the U.S. presidency increased.

A decline in the won-dollar exchange rate means the dollar value falls while the won appreciates. Biden plans to supply more dollars to the already liquidity-rich U.S. market by implementing aggressive economic stimulus measures and maintaining low interest rates.

Moreover, compared to the Trump administration, the possibility of tariff hikes on China is expected to decrease, increasing the preference for risk assets in financial markets. As a result, the dollar value is falling, and emerging market currencies are strengthening.

The falling dollar value is inevitably negative for Korea’s major export companies. Damage is feared not only in semiconductors but also in key industries such as automobiles, shipbuilding, and chemicals.

Even a drop of several tens of won in the exchange rate could cause Hyundai and Kia Motors to face losses of several hundred billion won. Shipbuilding and chemical industries are also known to suffer losses of hundreds of millions of won. If the won-dollar exchange rate falls to the 1000-won level, some companies could face the worst-case scenario of incurring losses even when exporting goods.

Professor Hyunhan Shin of Yonsei University’s Business School emphasized, "A decline in the won-dollar exchange rate weakens the price competitiveness of domestic export companies," adding, "Considering this situation, it is necessary to establish next year’s management and export/procurement strategies while also focusing on improving non-price competitiveness such as design, quality enhancement, and development of new technologies and products."

This content was produced with the assistance of AI translation services.