Korea Inc. Profits Surge, but Investment Stalls as Chipmakers Carry Capex
South Korea's major corporations sharply improved their profitability in the first half of this year, with operating profit nearly reaching 400 trillion won, or approximately $289.48 billion, but capital spending to support future growth remained largely unchanged from a year earlier. Samsung Electr
South Korean corporations reported a significant rise in profitability during the first half of the year, with operating profit nearing 400 trillion won, or roughly $289.48 billion. However, capital spending to fuel future growth remained stagnant compared to the previous year. Samsung Electronics and SK hynix made substantial increases in capital expenditures, countering the reduced investment in other sectors, while the other 329 companies experienced a decline in capital spending at a double-digit rate.
According to a survey conducted by Leaders Index, a corporate analysis firm, the combined operating profit of South Korea's 500 largest revenue-generating companies reached 392.08 trillion won in the first half, a 245.7% increase from 113.43 trillion won a year prior. Capital expenditures, however, only rose by 2.9 billion won, or 0.002%, to 147.697 trillion won, leaving overall investment essentially unchanged.
The stability in overall capital spending was mainly attributed to the aggressive investments from Samsung Electronics and SK hynix. The former's capital expenditures grew by 14.2% to 32.96 trillion won, while SK hynix's surged 71.5% to 18.99 trillion won. Collectively, these two companies accounted for a 12 trillion won increase in capital spending, raising their share of total capital spending to 35.2% from 27.0% a year earlier.
In contrast to Samsung Electronics and SK hynix, the remaining 329 companies saw a 72.3% increase in operating profit to 147.20 trillion won, with cash and cash equivalents rising by 24.8% to 417.61 trillion won. However, their capital spending decreased by 11.1% to 95.74 trillion won, indicating cautiousness regarding future investments despite stronger earnings and ample cash reserves. Notably, declines in capital spending were particularly evident in the battery and petrochemical sectors.
Battery industry capital expenditures fell by 47.0% to 6.16 trillion won, with SK On's spending dropping by 59.9% and LG Energy Solution's by 45.5%. The petrochemical sector also experienced a 38.8% reduction in capital spending, with Lotte Chemical cutting investments by 64.8%, Hanwha Solutions by 58.6%, and LG Chem by 43.7%. Conversely, the defense and service sectors witnessed an increase in investment.
The defense sector's capital expenditures rose by 38.1%, driven by a 23.4% increase at Hanwha Aerospace and a 189.2% jump at Korea Aerospace Industries. The service sector's investment climbed by 36.1%, partly fueled by Naver's over 132% increase in capital spending. Investment also expanded in the shipbuilding, machinery and equipment, and transportation sectors, by 20.5%, 25.3%, and respectively.
These trends align with a recent analysis by the Korea Development Institute (KDI), which forecasts a 7.9% increase in South Korea's facility investment this year. Despite the overall investment indicators, the KDI notes that much of the growth will likely be concentrated in semiconductor-related sectors due to the expansion of global investment in artificial intelligence infrastructure.
Written by urgent.news from BusinessKorea's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
