The IT industry is stagnant, with signs that its role as a growth engine of the Korean economy is coming to an end. Major Korean IT firms saw their operating profit plummet in the second quarter, and some recorded a deficit for the third straight quarter.
They attribute the sluggishness to weak global demand, which is unconvincing given that Apple has been posting record results with innovative products like the iPhone and the iPad.
LG Display's sales dropped 6.3 percent on-year to W6.05 trillion in the quarter, and it recorded an operating deficit of W48 billion (US$1=W1,055). The situation at Hynix Semiconductor is little better. The chip maker saw its sales dwindle 16 percent to W2.76 trillion, and operating profit more than halved to W447 billion. Samsung Electronics is expected to post W3.7 trillion in operating profit for the quarter, far below the W5 trillion a year ago.
The poor performance translated into a smaller proportion of total exports for the IT industry, with the figure below the 30 percent mark for the first time in 18 years at 29.4 percent. The industry has served as the driving force of the nation on the road to becoming a developed economy since 2003, when the figure soared to 40 percent.
Korean IT firms have failed to diversify their business models and focused only on short-term results, said consulting firm A.T. Kearney. They need to try creative business models like Apple to survive in the global competition, it added.