Corporate Korea in trouble

Policymakers should see why manufacturing sector is dying


The situation facing the nation's manufacturing industry is getting increasingly ominous. Dark clouds are weighing down all related figures, ranging from corporate performance and indices to business sentiment and outlook. Samsung Electronics' second-quarter performance report released Wednesday backed up this gloomy reality.

The world's largest semiconductor and smartphone maker saw its net and operating profits in the April to June period plunge 55.6 percent and 53 percent, respectively, from a year ago. The biggest reason was the sluggish showing of its chip-making division, which marked drops of 26 percent and 70 percent in its sales and operating profit. Considering the grim reality, the company has decided to put off its shareholder return plan, such as increasing dividends and carrying out a share buyback, until next year.

The situation at SK hynix is hardly different. The operating profit of the second-largest memory chip maker in the world sank below the 1 trillion won ($847 million) mark for the first time in 33 months. Other companies are also slipping into an earnings shock. According to financial information provider FnGuide, the operating profits and net profits of 269 listed companies in the first half of the year were estimated to plummet 36.6 percent and 43.6 percent, respectively, year-on-year.

Related economic indices and business sentiment are also freezing. Statistics Korea reported the manufacturing sector's production capacity in the second quarter of the year stood at 101.3, recording the steepest fall since the government began to compile relevant data in 1971. According to a recent Bank of Korea report, the business survey index fell 2 points further to 73 in July. To make things worse, automotive and shipbuilding workers have voted to stage strikes, entering into their "summer struggle."

Local manufacturers are experiencing an unprecedented sense of crisis amid the prolonged trade dispute between the U.S. and China and Japan's export restrictions against Korea. Alarm bells are loudly ringing in the manufacturing sector whose growth engine has begun to die. If left ignored further, the ongoing crisis is likely to turn Korea into a global manufacturing laggard. The Moon Jaein administration should never make light of businesses' hardships. It should be keenly aware of the severity of their troubles and focus on reinvigorating "Corporate Korea" through a drastic policy turnaround.