[Column] Concerns of SMEs on the Crisis Facing Samsung Electronics

"I wish I could fail like Samsung Electronics."

This was an offhand remark made by a small business owner I recently met. Samsung Electronics is unlikely to fail, so what does this mean? Moreover, from his position as a supplier to Samsung Electronics, Samsung must not fail. After listening to him, it became clear that what he emphasized was not failing itself, but failing ‘like Samsung Electronics.’ The origin of this complaint was Samsung Electronics’ preliminary earnings announcement on the 6th. On that day, Samsung Electronics announced that its operating profit for last year was 43.37 trillion won. The fourth quarter operating profit dropped to about one-third compared to the same period last year. Although annual sales surpassed 300 trillion won for the first time, profitability took a direct hit, and the ‘record-breaking earnings shock’ evaluation covered all Korean newspapers. Samsung Electronics seemed to be on the brink of failure. There was also analysis that the memory semiconductor downturn and the global home appliance and IT demand slump were so severe that even a company as large as Samsung Electronics could be shaken.

However, the small business owner, who had been anxiously following the news of Samsung Electronics’ crisis, hesitated when he saw the operating profit figure of 43 trillion won. From his perspective, barely breaking even by supplying to Samsung Electronics, the ‘crisis’ of Samsung Electronics posting profits in the 40 trillion won range?more than ten thousand times the sales of his own company?must have sounded like a story from another world.

Perhaps what he truly worries about is the impact this incomprehensible ‘crisis’ of Samsung Electronics might have on his own company. If Samsung Electronics uses the crisis as a reason to cut costs, the business conditions of its supplier small businesses could immediately worsen. The sense of crisis embedded in his words, "If they squeeze us just because they made profits in the 40 trillion won range, we will run at a loss," reflects the harsh reality faced not only by Samsung’s suppliers but by small businesses across Korea. Despite the sharp rise in raw material prices, most small businesses still do not receive proper payment for their supplies. According to a 2021 survey, raw material prices increased by an average of 47.6%, but the payment increase rate from large corporations to suppliers was only 10.2%. This is why the small business community has long hoped for the implementation of the supply price linkage system scheduled for October this year. Given the situation with fair supply payments, under the dominant-subordinate relationship, small businesses have often suffered even from the slightest cough of large corporations.

Samsung Electronics is regarded as a leading company actively promoting win-win cooperation with small businesses. To minimize the burden on partner companies caused by rising raw material prices, since 2010, it has regularly reflected major raw material price fluctuations in supply prices. It also participated in the pilot operation of the supply price linkage system last year. How will this long-maintained value of win-win cooperation fare in the current crisis? True ‘win-win’?not generosity from the treasury but genuine mutual survival?shines even brighter in moments of crisis.

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