Samsung, LG, SK Spent 85 Trillion Won on Raw Materials in the First Half of the Year

Samsung Electronics 24.6%, SK Hynix 44.4%↑
Rising Labor Costs Raise Profitability Management Concerns

[Asia Economy Reporter Moon Chaeseok] This year, global raw material prices surged sharply and wages increased rapidly, resulting in a significant rise in cost burdens for major companies in the first half of the year. Due to the impact of economic recession and inflation (price increases), consumer demand has decreased, leading to inventory accumulation, and profitability is expected to deteriorate inevitably in the second half of the year.

According to the semi-annual reports submitted by each company to the Financial Supervisory Service on the 19th, Samsung Electronics' raw material purchase costs as of the end of June amounted to 58.0521 trillion KRW, an increase of 24.6% (11.4482 trillion KRW) compared to the same period last year. Last year, it recorded an all-time high of 103.7 trillion KRW, and if this trend continues, it is expected to surpass that this year. Considering past records of around 70 to 80 trillion KRW over the last decade, the 25% increase is seen by the industry as higher than expected.

Among major raw materials, the price of mobile APs (application processors) used in smartphones rose the most, by 58%. Camera modules (10%) and wafers (4%) also increased. In the home appliance sector, raw material market prices for steel plates, plastics, and copper remain unstable.

LG Electronics also spent 20.659 trillion KRW on raw materials in the first half, an increase of 17.8% (3.1179 trillion KRW) compared to the previous year. The price increases in steel (22%), plastics (20.3%), and copper (40.2%) for home appliances had a significant impact. SK Hynix spent 6.1408 trillion KRW on raw material purchases, up 44.4% from the same period last year. The three companies' combined raw material costs in the first half of this year reached 85 trillion KRW.

The unprecedented wage increases also led to a surge in labor costs, adding to the cost burden. Samsung Electronics' labor costs in the first half of this year were 15.9534 trillion KRW, up 14.1% (1.9762 trillion KRW) from the same period last year.

This reflects Samsung Electronics' implementation of an average 9% wage increase this year (5% base increase, average 4% performance increase) and the inclusion of performance bonuses for last year's strong results in this year's labor costs. The significant increase in Samsung Electronics' number of employees compared to last year also contributed to the rise in labor costs. As of the end of June, Samsung Electronics had a total of 117,321 domestic employees, an increase of 6,240 from the same period last year, marking the largest scale ever.

During the same period, LG Electronics' labor costs increased by 22.7% to 4.9205 trillion KRW, and SK Hynix's rose by 45.4% to 3.5977 trillion KRW.

An industry insider from the home appliance sector said, "It is certain that uncertainty is high, but the second half of the year is expected to be somewhat better than the first half," adding, "Various costs such as logistics fees are linked to oil prices, and recently, a trend of slight stabilization in oil prices has been detected."

Another industry insider said, "It is difficult to view the tens of percent increase in costs compared to the previous year as a natural result of sales growth," and added, "There is no choice but to break through head-on by expanding supply sources and securing a high-quality product portfolio."

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