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Chaebol bracing for worsening business outlook

By Jun Ji-hye

Samsung, LG and other large business groups are scrambling to rewrite their business plans for the latter half of this year and next year as they grapple with deteriorating business conditions abroad amid the U.S.-China trade war and Japan's export control against Korea, company officials said Monday.

Stagnant domestic consumption, the government's labor-friendly policies and other unfavorable factors are making things worse for chaebol, which have already begun reviewing their business operation plans and establishing contingency plans.

Deepening pessimism of manufacturers regarding their performance also came out through a survey by the Korea Chamber of Commerce and Industry (KCCI), Monday.

In the survey on 2,300 manufacturers, the business survey index (BSI) for the third quarter stood at 72, down from 87 for the second quarter.

A BSI below 100 means more companies hold a negative outlook for the upcoming quarter than positive.

The KCCI said 60.6 percent of manufacturers surveyed said their performance during the first half of the year would fail to reach their goals.

Apparently being aware of the crises, Samsung Electronics Vice Chairman Lee Jae-yong convened a meeting with top executives including Kim Ki-nam, head of the company's device solutions division, Saturday, to discuss countermeasures against Japan's export restrictions of key materials used in manufacture of semiconductors and displays, and the possibilities of expanding the measures to other areas.

Samsung Electronics Vice Chairman Lee Jae-yong arrives at Gimpo International Airport in Seoul following his business trip to Japan, Friday. / Yonhap
Samsung Electronics Vice Chairman Lee Jae-yong arrives at Gimpo International Airport in Seoul following his business trip to Japan, Friday. / Yonhap

The meeting took place a day after the de facto leader of the Korean tech giant returned from his six-day business trip to Japan that was made after the Japanese government announced its decision, July 1, to strengthen the export of three items to Korea amid a worsening diplomatic row between the two nations.

The three items are fluorinated polyimide used to make the flexible organic light-emitting diode (OLED) displays for TVs and smartphones, and photoresist and hydrogen fluoride, also known as etching gas, which are necessary in the semiconductor fabrication process.

"The meeting lasted for about three to four hours," a Samsung Electronics official said. "I heard Vice Chairman Lee ordered the senior executives to come up with all possible scenarios in preparation for Japan's possible expansion of the list of items subject to export restrictions."

LG Group is also checking the business situations of its affiliates.

"There would be no businesses unrelated to Japan, thus we are keenly monitoring any developments and preparing for uncertainty to prevent any problems from coming up," an LG Group official said.

Lotte Group plans to hold a five-day meeting among key executives beginning Tuesday in Seoul.

It marks the first time for Lotte Group to hold such a five-day meeting, industry officials said, adding this shows just how seriously the company is taking Japan's economic retaliation.


By Jun Ji-hye

Samsung, LG and other large business groups are scrambling to rewrite their business plans for the latter half of this year and next year as they grapple with deteriorating business conditions abroad amid the U.S.-China trade war and Japan's export control against Korea, company officials said Monday.

Stagnant domestic consumption, the government's labor-friendly policies and other unfavorable factors are making things worse for chaebol, which have already begun reviewing their business operation plans and establishing contingency plans.

Deepening pessimism of manufacturers regarding their performance also came out through a survey by the Korea Chamber of Commerce and Industry (KCCI), Monday.

In the survey on 2,300 manufacturers, the business survey index (BSI) for the third quarter stood at 72, down from 87 for the second quarter.

A BSI below 100 means more companies hold a negative outlook for the upcoming quarter than positive.

The KCCI said 60.6 percent of manufacturers surveyed said their performance during the first half of the year would fail to reach their goals.

Apparently being aware of the crises, Samsung Electronics Vice Chairman Lee Jae-yong convened a meeting with top executives including Kim Ki-nam, head of the company's device solutions division, Saturday, to discuss countermeasures against Japan's export restrictions of key materials used in manufacture of semiconductors and displays, and the possibilities of expanding the measures to other areas.

Samsung Electronics Vice Chairman Lee Jae-yong arrives at Gimpo International Airport in Seoul following his business trip to Japan, Friday. / Yonhap
Samsung Electronics Vice Chairman Lee Jae-yong arrives at Gimpo International Airport in Seoul following his business trip to Japan, Friday. / Yonhap

The meeting took place a day after the de facto leader of the Korean tech giant returned from his six-day business trip to Japan that was made after the Japanese government announced its decision, July 1, to strengthen the export of three items to Korea amid a worsening diplomatic row between the two nations.

The three items are fluorinated polyimide used to make the flexible organic light-emitting diode (OLED) displays for TVs and smartphones, and photoresist and hydrogen fluoride, also known as etching gas, which are necessary in the semiconductor fabrication process.

"The meeting lasted for about three to four hours," a Samsung Electronics official said. "I heard Vice Chairman Lee ordered the senior executives to come up with all possible scenarios in preparation for Japan's possible expansion of the list of items subject to export restrictions."

LG Group is also checking the business situations of its affiliates.

"There would be no businesses unrelated to Japan, thus we are keenly monitoring any developments and preparing for uncertainty to prevent any problems from coming up," an LG Group official said.

Lotte Group plans to hold a five-day meeting among key executives beginning Tuesday in Seoul.

It marks the first time for Lotte Group to hold such a five-day meeting, industry officials said, adding this shows just how seriously the company is taking Japan's economic retaliation.


Jun Ji-hye jjh@koreatimes.co.kr


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