The worst of times

A reality check on the Korean economy — its weaknesses and disappointments — has been provided by the major stumbles by two of the country’s largest manufacturers, Samsung Electronics and Hyundai Motor. According to a study by the Korea International Trade Association, the share of shipments to China against total exports slipped to 24.4 percent in the first eight months of this year from 26 percent last year. Exports in general have been decreasing for three straight years. Exports to China have been damaged by Beijing’s punitive response to Seoul’s decision to deploy a U.S.-led antimissile system, but the competitiveness of Korea’s industrial products in its biggest market is steadily on the decline.

Many other statistics all point to the deteriorating industrial competitiveness of Korea Inc. Samsung Electronics is the only Korean brand that has been able to remain among the world’s top five bestselling smartphones. Chinese brands rank third to fifth. Samsung Electronics was also the only name that made it into the top 100 global brand ranking released by the European Brands Association, which included nine Chinese names. China had an 18.3 percent global share in 13 mainstay products from 2011 to 2015, while the share for Korea was a pitiful 5.3 percent. U.S., European, and Japanese products are gaining ground in China, where consumers have turned more upscale and safety-oriented.

Korea Inc. has refused to face the music. China has been gobbling up excellent technology companies around the world. Among Chinese college graduates, three million choose to start their own businesses every year. China has been persistently grooming technology companies over the last two decades while Korea was pumping out one regulation after another.

Korea’s mainstay industries have all weakened and now the quality of Korea’s products is being challenged. Samsung Electronics has estimated that its loss from the discontinuation of the Galaxy Note7 will reach nearly 7 trillion won ($6.2 billion) until the first quarter of next year. Moreover, the company’s reputation is being questioned by consumers around the world. The union of Hyundai Motor has waged periodic strikes throughout the summer that cost the company 3 trillion won. A number of suppliers are on the brink of going bankrupt.

Once the U.S. central bank lifts interest rates, Korea’s astronomical household debt could further dampen domestic demand.

We cannot even afford to sigh and whine. Samsung Electronics must reinvigorate Korea’s industrial prowess to win back global confidence with innovation. That is the only way our economy can surge back.

JoongAng Ilbo, October 15, Page 30