"Overseas Sales of Top 100 Companies Decline for 2nd Year Excluding Electric and Electronics Sector" (Summary)

Federation of Korean Industries Analyzes Consolidated Performance Data from 2016 to 2020
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[Asia Economy Reporter Kim Heung-soon] Due to worsening external conditions such as the US-China trade dispute and the COVID-19 pandemic, overseas sales of the top 100 domestic companies by revenue have declined for two consecutive years until last year, according to an analysis. Except for the electrical and electronics sector, most of the main industries recorded double-digit negative growth in overseas performance, highlighting the need to comprehensively establish overseas business strategies that move beyond the ‘semiconductor boom’ illusion.

The Federation of Korean Industries (FKI) announced on the 17th that an analysis of consolidated performance data from 2016 to 2020 for the top 100 companies by revenue as of 2019 showed that these companies’ overseas sales experienced negative growth for two consecutive years due to the global economic crisis. By year, overseas sales of the top 100 companies were KRW 734.2 trillion in 2019, down 2.1% from the previous year, and KRW 693.1 trillion last year, a 5.6% decrease compared to the prior year.

Most Key Industries Experienced Double-Digit Negative Growth in 2020

The overseas sales performance trend announced by FKI that day clearly reflects the vulnerability of Korean companies to external economic conditions. Business results fluctuate depending on the domestic and international economic situations of major export countries, as well as epidemics like COVID-19. The electrical and electronics sector was the only major domestic industry to record a 4% increase in overseas sales last year compared to the previous year, showing an upward trend. This was due to the rapid growth of the non-face-to-face economy caused by the COVID-19 pandemic, which increased demand for mobile devices, PCs, semiconductors, and secondary electronics.

However, this is also analyzed to be a base effect resulting from poor performance in 2019. According to the Financial Supervisory Service’s electronic disclosure system, recent overseas sales trends in the electrical and electronics sector peaked at KRW 327 trillion in 2018 during the semiconductor ‘supercycle’ boom, then fell to KRW 300 trillion the following year. The KRW 312 trillion recorded last year was a temporary growth due to non-face-to-face demand, and total sales were actually lower than KRW 316 trillion in 2017. The economic community warns that misjudging the base effect of the non-face-to-face economy centered on semiconductors could undermine the fundamentals of the Korean economy.

Automobiles and auto parts saw overseas sales decline by 7.1% due to production halts by North American and European automakers in the second quarter. The situation is much more severe in other industries heavily dependent on raw materials. Energy and chemicals experienced a 26.3% decrease in overseas sales last year compared to the previous year due to sluggish business conditions caused by low oil prices and weak refining margins (the value after subtracting crude oil prices and transportation/operating costs from petroleum product prices). Steel and metals also saw overseas sales drop by 12.1% due to a sharp decline in sales volume amid demand industry recession. Construction and building materials (-20.0%), shipbuilding and machinery (-17.4%), and general trading companies (-11.4%) also recorded double-digit decreases.

The Korea CXO Research Institute, a corporate analysis specialist, also analyzed and announced the sales status of the top 1,000 domestic companies last year, stating, "The sales scale of these companies last year was about KRW 1,489 trillion, down 1.3% from KRW 1,508 trillion in 2019, and smaller than KRW 1,492 trillion in 2017," adding, "Meeting the unexpected challenge of COVID-19, the ‘physical clock’ of the Korean economy has returned to the level before 2017."

Sales to Emerging Asian Countries Such as China, India, and Vietnam Declined the Most

FKI cited the decrease in overseas sales as being caused by the decline in real growth rates in emerging Asian countries such as China, India, and Vietnam, which are global production bases and the largest overseas business target countries for major domestic companies including Samsung, Hyundai Motor Group, SK, LG, POSCO, and Hanwha. According to the International Monetary Fund (IMF), the real growth rate of these emerging countries decreased by 6.3 percentage points last year compared to the previous year. In particular, India’s outlook is negative this year as the recent spread of COVID-19 is uncontrollable.

Kim Bong-man, head of FKI’s International Cooperation Office, stated, "With the emergence of COVID-19 variants, unstable vaccine supply, and signs of a fourth wave, the overseas business environment for our companies remains unstable." He added, "To improve market access to emerging Asian countries where overseas sales decreased the most last year, our trade authorities should actively pursue trade strategies such as ratification and enforcement of the Korea-Indonesia Comprehensive Economic Partnership Agreement (CEPA), ratification of the Regional Comprehensive Economic Partnership (RCEP), and creating conditions for joining the Trans-Pacific Partnership (TPP)."

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