South Korea’s tech behemoth Samsung Electronics went into emergency business management mode this month in its bid to minimize worsening profitability caused by the stronger won value.
The latest move came as foreign exchange risks triggered by the Korean won’s relentless appreciation against major currencies including the dollar, yen and euro are significantly undermining Samsung’s profitability.
“Despite our efforts to minimize consequences prompted by the won’s appreciation, the rise in the currency value can possibly cause a three trillion won contraction in our profit this year,” noted a high-ranking official of Samsung Sunday.
This amounts to a whopping 10 percent of Samsung’s annual profit considering Samsung is expected to generate about 30 trillion won in OP this year. In response, the top brass of Samsung ordered every business division to come up with contingency plans against possible crisis situation caused by further appreciation of the won.
Under the management mode, Samsung strives to formulate countermeasures to volatility of major currencies including the euro, yen, real and ruble and keep a close track on sales and profits at every different crisis level.
Samsung believes it will suffer higher foreign exchange risk this year as the stronger won against other major currencies is lowering conversion value of the won and undercutting price competitiveness of Korean products in the global market.
“Global export-oriented companies including Samsung Electronics, Hyundai Motor and LG Electronics hit a snag of foreign exchange rate risk,” noted a high-ranking official in the electronics industry. “The appreciating trend of the won will worsen industry-wide profitability and vitality.”