Members of the National Samsung Electronics Union stage a rally near the company's plant in Hwaseong, Gyeonggi Province, July 8. Korea Times photo by Shim Hyun-chul
Crisis at Samsung Electronics
Samsung Electronics began 2024 on a positive note as a local court acquitted Executive Chairman Lee Jae-yong on Feb. 5 of financial crimes related to the 2015 merger of two affiliates. Additionally, its semiconductor division returned to profitability in the first quarter after five consecutive quarters of losses.
Amid rising global demand for artificial intelligence servers, the company's delayed investments in high-bandwidth memory caused its chip division's quarterly operating profit to lag behind that of SK hynix for the first time, raising the possibility of losing its status as Korea's most profitable chipmaker this year.
The stock price of Korea's largest firm by market capitalization fell below 50,000 won ($35) on Nov. 14 for the first time since the COVID-19 pandemic. Meanwhile, the company's union staged its first-ever strike in its 55-year history on July 8, continuing to reject the management's proposal of a 5.1 percent wage hike.
Although Lee acknowledged the crisis, the tech giant chose not to replace its three vice chairmen during the year-end leadership reshuffle on Nov. 27, signaling its intention to maintain stability ahead of an appellate court ruling on the chairman scheduled for February next year.
Bank of Korea (BOK) Governor Rhee Chang-yong speaks during a press briefing at the BOK headquarters, Oct. 11, when the central bank cut its benchmark interest rate from 3.5 percent to 3.25 percent. Yonhap
1st rate cut in more than 3 years
The Bank of Korea (BOK) cut its benchmark interest rate for the first time in more than three years, marking a shift after a years-long monetary tightening cycle designed to curb inflation caused by the pandemic.
The BOK lowered the policy rate by 25 basis points to 3.25 percent in October, delivering the first rate cut since August 2021. It went ahead with a second rate cut in November, trimming the base rate by 25 basis points to 3 percent.
The key interest rate reached 3.5 percent — the highest since December 2008 — after the central bank carried out seven consecutive rate hikes between April 2022 and January 2023.
The back-to-back rate cuts in 2024 came as consumer inflation is moderating and is growing less than the BOK's 2 percent target.
The easing of inflation has prompted the BOK to shift its focus more toward economic growth, amid concerns that Korea is entering a period of low growth, with projections around the 1 percent range.
The BOK still faces the challenging task of curbing household debt, which shows no signs of easing. With lowered borrowing rates, debt levels may rise as more individuals are inclined to take out loans.
Police inspectors and officials from Mercedes-Benz inspect the automaker's charred EQE electric vehicle in Incheon, Aug. 8, a week after a fire triggered by the car damaged hundreds of other vehicles parked at an underground garage of an apartment complex in the western port city. Yonhap
Deadly battery fires spark EV concerns
Following the deaths of 23 workers in a fire on June 24 at lithium battery maker Aricell's plant in Hwaseong, Gyeonggi Province, another fire on Aug. 1, triggered by a Mercedes-Benz electric sedan in the underground garage of an apartment complex in Incheon, left hundreds of cars damaged and 23 people hospitalized.
The series of accidents sparked fears over the safety of electric vehicles (EVs) and other devices equipped with batteries containing lithium, dealing a blow to the already-struggling battery industry, amid decelerating global EV demand.
As more buildings prohibited the entry of EVs, the government mandated carmakers to disclose information about the batteries they use. In response, companies began developing technologies to prevent fatal fires.
However, a police investigation into the fire involving the Mercedes-Benz vehicle ended without clarifying the specific cause of the accident.
Battery firms are also adopting cost-cutting measures to address declining profitability.
A biker rides over a crosswalk in Seoul's financial district of Yeouido, Nov. 17. Yonhap
Corporate Value-up Program to boost stocks
The government launched the Corporate Value-up Program to invigorate the Korean stock market, which is currently one of the worst performers globally.
Unveiled in February, the program aims to improve corporate governance, strengthen self-regulatory measures, and implement other strategies to address the so-called Korea discount — the lower valuation of domestic stocks compared to global peers.
The program includes the Value-up Fund, worth hundreds of billions of won, which is dedicated to investing in the Value-up index and index-based ETFs.
The Value-up Index refers to a group of firms selected from the benchmark KOSPI and the junior Kosdaq bourse, based on five key factors: market capitalization, dividend payouts, earnings, price-to-book value and return on equity rankings.
The Value-up Fund is also intended to support companies that are currently not included in the Value-up Index but faithfully observe relevant rules and therefore have the potential to join the index.
SK Group Chairman Chey Tae-won bows in apology for sparking controversy over a divorce lawsuit with his estranged wife, Roh Soh-yeong, during a press conference at the group's headquarters in Seoul, June 17. Yonhap
SK chief's $1 billion divorce settlement
The Seoul High Court ordered SK Group Chairman Chey Tae-won on May 30 to pay 1.38 trillion won to his estranged wife, Roh Soh-yeong, in a property division settlement, as well as an additional 2 billion won in alimony, breaking the record for the largest amount ever awarded in a property division case in Korea.
The amount, approximately 20 times higher than the sum ordered by a lower court, raised significant concerns for Korea's second-largest conglomerate. There were growing worries about the potential impact on its efforts to rebalance its portfolio this year, including the successful merger of its two energy affiliates, which was completed on Nov. 1.
Controversy over unethical ties between politics and corporate interests erupted once again when an appellate court overturned a lower court ruling that late former President Roh Tae-woo's daughter had not contributed to her husband's asset accumulation.
Chey and Roh are now awaiting the Supreme Court's ruling on their divorce proceeding, which started in 2017 after the businessman's admission of having a child out of wedlock in 2015.
The logo of Korea Zinc, the world's largest zinc smelter, is pictured during a press conference at the firm's headquarters in Seoul, Oct. 22. Reuters-Yonhap
MBK Partners-Korea Zinc ownership battle
Private equity firm MBK Partners and Korea Zinc have been engaged in a months-long battle for control of the world's largest zinc smelter.
The battle erupted after the breakdown of a long-standing partnership between Korea Zinc and its largest shareholder, Young Poong. Listed as a top 30 conglomerate, Young Poong teamed up with MBK Partners in an attempt to secure enough shares to gain the management rights of Korea Zinc.
As the battle intensified, the MBK Partners-Young Poong coalition edged closer to gaining majority control. By late December, the coalition had jointly acquired a 40.97 percent stake in Korea Zinc and held 46.7 percent of the voting shares, excluding treasury stocks.
For Korea Zinc, the situation turned unfavorable as companies previously regarded as allies of chairman Choi Yun-beom began selling their stakes in the company.
This selling spree left Choi with only about 34 percent of Korea Zinc's shares as of late December, significantly reducing his influence in the company and weakening his control over its future direction amidst the ongoing power struggle.
Army helicopters pass by Lotte World Tower in Seoul, Sept. 3. Yonhap
Cash crunch rumors at Lotte
Rumors spread online on Nov. 17 suggesting that Lotte Group could declare a moratorium in December due to a liquidity crisis stemming from its unprofitable investments and financial support for its cash-strapped construction unit over the past couple of years.
Although the nation's sixth-largest conglomerate dismissed the rumors as groundless and threatened to sue the source of the speculation after the stock prices of its affiliates plummeted, it was later revealed that some bonds issued by Lotte Chemical failed to meet the interest coverage ratio clause. As a result, the company was forced to schedule a bondholders' meeting to discuss the possibility of removing the clause.
On Dec. 19, the chemical firm managed to win over its creditors by offering Seoul's landmark Lotte World Tower as collateral and deciding to sell its lucrative car rental business.
Amid the worsening performance of its retail and petrochemical businesses, Lotte downsized its workforce and asked its executives to work six days a week, following a trend set by many Korean conglomerates this year.
Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok, center, gives a press briefing on Korea's 2025 inclusion in the World Government Bond Index (WGBI) at the Goverment Complex Seoul, Oct. 9. Yonhap
Korea to join WGBI in 2025
Korea will join the World Government Bond Index (WGBI) run by FTSE Russell starting in November 2025, raising optimism that the inclusion will boost the domestic bond market and enhance its competitiveness on the global stage.
The country was placed on the watch list for two previous years, before FTSE Russell, a leading global index provider and subsidiary of London Stock Exchange Group, decided in October of this year to include it on the index.
With a market value of $29 trillion, the WGBI is a highly sought-after benchmark that would attract substantial capital inflows from global investors.
Korea is anticipated to draw as much as 90 trillion won ($62 billion) worth of foreign investments through the WGBI inclusion.
According to the Ministry of Economy and Finance, FTSE Russell recognized a set of market reform measures carried out by the government in recent years.
The reform measures included extended trading hours of the Korean currency and establishing a settlement system with Euroclear Bank and Clearstream to improve foreign investors' access to the domestic treasury bond market.
Korean Air and Asiana Airlines aircraft are parked on the tarmac at Incheon International Airport, Nov. 28. Yonhap
Korean Air completes acquisition of Asiana
Korean Air successfully completed its four-year attempt to acquire Asiana Airlines on Dec. 12, incorporating the smaller rival as a subsidiary, after receiving much-awaited approvals from antitrust regulators in the European Union and the United States.
The combined carrier is set to become the world's 11th largest airline by annual passenger volume.
However, concerns remain over the possibility that its monopoly in the domestic full-service carrier market could negatively impact passengers, particularly Asiana's customers who may face disadvantages when trying to use their mileage points.
Politicians and residents of the southeastern port city of Busan have also urged Korean Air to place the headquarters of an integrated low-cost carrier in the city, once the company finishes the merger of Jin Air, Air Seoul and Air Busan.
Additionally, Korean Air is tasked with improving the financial soundness of the cash-strapped Asiana, which had been under the control of creditors led by the state-run Korea Development Bank since 2020.
Containers are stacked up at a port in Busan, Nov. 1. Yonhap
Low growth becomes new normal
As the economy has been slowing down, Korea is facing concerns that low growth may be becoming the new normal.
The Bank of Korea (BOK) projected that the country's GDP growth will stand at 1.9 percent in 2025 and 1.8 percent in 2026, marking the first time since 1954 that Asia's fourth-largest economy will grow below the 2 percent range for two consecutive years.
Likewise, five global financial institutions — Barclays, Citigroup, J.P. Morgan, HSBC, and Nomura — have estimated that Korea's GDP growth rate will fall between 1.7 percent and 1.9 percent next year.
According to the Organization for Economic Cooperation and Development (OECD), Korea's potential GDP growth has been slowing down after reaching 5.4 percent in 2021. The stagnant economy is linked to a heavy reliance on exports for decades, making the country vulnerable to heighted trade protectionism. Such a trend is likely to intensify as a second Donald Trump presidency is poised to impose higher tariffs on all goods imported into the United States.