Temporary Ceasefire in Middle East Conflict... ICT Industry Takes 'Cautious Approach'

Limited Impact but Long-term Approach
Expectations for Long-term Growth in the Middle East Remain

With the United States and Iran reaching a two-week ceasefire agreement and thus averting catastrophe, domestic information and communications technology (ICT) companies engaged in business and investment in the Middle East have stated that they will continue to respond cautiously with a long-term approach until a definitive end to the conflict is declared.

According to ICT export and import trends announced by the Ministry of Science and ICT, Korea's ICT exports to the Middle East amounted to $2.049 billion as of the end of last year, accounting for only 0.9% of total ICT exports, so the direct impact from the war is not significant. However, since companies have established local subsidiaries and branches in the Middle East and are collaborating with local partners for their business, there is a prevailing atmosphere of taking a prudent, long-term approach to business until the war is completely over.

Naver is closely monitoring the situation by operating a real-time hotline with its local subsidiary in Saudi Arabia. Despite the ceasefire agreement between the United States and Iran, the company is continuing remote work arrangements that were implemented after the outbreak of hostilities. Naver is currently carrying out projects in Saudi Arabia such as digital twin and map-based super application development, and there are reportedly no direct physical damages from the conflict. However, if the Saudi government prioritizes infrastructure restoration with its budget after the end of the war, it could disrupt IT projects, which is an issue requiring proactive responses. A Naver representative stated, "We will take sufficient time and approach the Saudi business from a long-term perspective."

Global big tech company Amazon Web Services (AWS) also faced disruptions at its data centers located in Bahrain and the United Arab Emirates due to the recent war, but the company is working on recovery and plans to continue long-term investments. It is known that AWS has implemented a 24-hour emergency response system to maintain local infrastructure.

Among game companies, those with subsidiaries in the Middle East, such as Nexon and Nexters, are monitoring safety through remote work. As of 2024, the proportion of the domestic gaming industry's exports to the Middle East is about 1.3%, so the level of business risk is not high at this stage. However, the possibility that demand for high-end games may decrease due to rising prices of digital device components poses a risk factor. Some game companies with high overseas sales expect to benefit from foreign exchange gains due to the rising exchange rate.

The IT service industry is expected to inevitably suffer a blow, as this conflict greatly influences customers' management and investment decisions. This is because companies tend to postpone investments during times of conflict. Korea Investment & Securities projected that, for these reasons, Samsung SDS's operating profit for the first quarter of this year will decrease by about 24% compared to the same period last year. Researcher Jeong Hoyoon said, "The Middle East conflict has increased management uncertainty for major affiliates, and, with rising oil prices, cost burdens have also grown, which could lead to a general reduction in IT investment." In particular, because Samsung SDS is also engaged in the logistics business, the short-term impact is expected to be significant.

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