Samsung’s dominance over the economy of South Korea

Samsung, when first founded in 1938, was merely a trading company. Over the next three decades, it expanded into areas including textiles, insurance, securities and retail. In the late 1960s, it entered the electronics industry. Now it has become the biggest conglomerate in South Korea, and also one of the biggest in almost any country. In a survey done by Counterpoint Research in December 2014, Samsung owned 46 percent of the smartphone sales market share in South Korea. In the span of the world, Samsung ruled with 31.2 percent of global market share, while Apple only accounted for 15.3 percent.

“The Republic of Samsung”

According to the CEO Score, the revenue of Samsung Electronics equaled to 25 percent of South Korea’s GDP in 2012. It was the highest among the world’s top 20 economies in terms of GDP. The figures for the U.S., China, Japan, and Germany were far below 10 percent. What’s more important is that this was a huge leap from 15.9 percent in 2008, indicating South Korea is increasingly polarized on specific company. The influence of Samsung is ubiquitous in every aspects of South Korean’s life: building roads, oil rigs, operating hotels, selling insurance and so on. Such environment is really discouraging and unfavorable to small enterprises when a single firm controls a big stake in every sector of the economy. Also, as an export oriented country, in which the value of exports of goods and services makes up over half of its GDP, Samsung constitutes up to 30 percent of the total exports.

The Ringing Bell-a more and more competitive environment

As the country’s economic dependence on one specific firm is increasing, the economy could be volatile and be hit hard if Samsung faces problems such as huge profit decline. And the problem is becoming more and more serious starting in 2014. In an area as fast-changing as in information and communication technology, no profit is forever. The competition in this industry is more and more fierce. In the third quarter of 2014, Samsung’s profit was slashed by 60 percent compared to last year, during the period when Apple launched the much-anticipated iPhone 6. Samsung also faces the problem of losing overseas’ market. A Chinese company, Xiaomi, is occupying Samsung’s market share in China with a much lower price, owning a 15 percent market share. Apparently, Samsung is losing the smartphone game when falling in the middle of the price spectrum.

Undoubtly South Korea is currently too dependent on a few companies. It indicates the need of diversification in its economy, from cars and smartphones, to finance, energy, and pharmaceutical sectors, in order to become a global player with more influence.



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