Revolutionary change is the only answer

Major Korean companies, including Samsung and SK, are bracing for strategy meetings for the latter half. The murky outlook for the global economy, coupled with deepening instabilities in global supply chains from the contest between the United States and China, are darkening their business prospects. The U.S. has been re-aligning the supply chains in key industries, such as chips and EVs, to its benefit through the CHIPS Act and the Inflation Reduction Act.

Korean chipmakers Samsung Electronics and SK hynix are caught in the crossfire after China retaliated against a slew of U.S. sanctions by banning sales of chips produced by Micron Technology. Korean memory players have already suffered big from their worst chip sales since the global financial crisis, with the operating profit of Samsung plunging 96 percent on year and SK logging a deficit of 3.4 trillion won ($2.6 billion) in the first quarter alone. In the meantime, Japan has emerged as the base for advanced chip manufacturing thanks to its geopolitical advantage.

Other industrial sectors are struggling too. None of Korea’s mainstay industries, like batteries, electric vehicles and vessels, are doing well. As a result, exports have been extending losses for eight straight months while the trade balance has been in the red for the 15th consecutive month. Out of 15 mainstream exports, 13 fell against a year-ago period last month.
Meanwhile, the fourth industrial revolution is evolving fast due to the rapid advance of generative artificial intelligence like ChatGPT. Apple released its first mixed-reality headset as the most ambitious digital gadget in nine years since the release of Apple Watch. It believes the augmented and virtual reality headset could be its most important product after iPhone.

Thirty years ago in Frankfurt, Germany, the late Samsung Group Chairman Lee Kun-hee announced a landmark strategy demanding employees to change everything “except for their wives and children” so that the Samsung brand would not become a second-rate name around the world. The desperation motivated the company to become a global behemoth.

Under the new management strategy, female recruits were favored, and employees worked on a unique work hour from 7 a.m. to 4 p.m. The radical changes in work culture helped elevate the company’s global competitiveness. Samsung ascended to No. 1 in memory chips, smartphones, TVs and a dozen more. The confidence in generating global companies has greatly affected Korean society.

Today’s economic environment has become graver than 30 years ago. Global powers blatantly pamper companies of their own. Global competition has gotten tougher. Painstaking change and rigorous overhaul can only help the country overcome the new challenges.