Samsung's Dominance Is Worrying for Korea

      January 09, 2013 12:49

      Samsung Electronics achieved staggering earnings in 2012 with sales totaling W201 trillion and operating profit of W29 trillion (US$1=W1,063). Sales were up a 21.9 percent and operating profit a massive 85.8 percent compared to 2011.

      Samsung managed to rise to the top of the global mobile phone market by rolling out hit products despite a global slump and a nasty patent dispute with Apple.

      But the bumper earnings also fuel concerns about the increasing imbalance in Korea's economy and industry. Last year, six of the top 10 listed Korean companies saw their operating profits shrink. Samsung Electronics' net profit last year accounted for an estimated 30 percent of the combined net profits of the top 30 businesses in Korea.

      Samsung's total market capitalization equals the combined market caps of the other nine listed companies that rank just below it. Due to the increasing size of Samsung, the entire Korean stock market reels at news involving the electronics giant. When Samsung sneezes, Korea catches cold. In fact, a more accurate view of the Korean economy can only be gained by ignoring Samsung.

      Samsung's enormous lead makes it look as if the entire Korean economy is being affected by the performance of a single company. This is a dangerous sign. When Nokia, which once ruled the global mobile phone market, began its rapid descent after failing to respond quickly to the rising popularity of smartphones, the entire Finnish economy was shaken.

      If Korea is to achieve balanced growth, it needs more companies like Samsung in different fields. Big businesses must take the initiative and bolster their competitiveness and take on global markets. The government must do its part to nurture promising small and mid-sized companies and create the right environment so that they may grow into the next Samsung Electronics.

      Samsung, too, must nurture promising small businesses by partnering with them instead of gobbling them up, so that its stellar performance can be felt across the economy. A new culture of coexistence would go a long way to quelling any bitterness and resentment others feel toward Samsung.

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