Tag Archive | "hyundai"

President Trump Praises Samsung for Plan to Manufacture in the U.S.

By Jenna Gibson

“Thank you, @Samsung! We would love to have you!” Donald Trump wrote on his personal Twitter account, linking to a story about a possible plan for the tech company to build a factory for home appliances in the United States.

The article called the announcement by Samsung “A win-win,” saying that “Companies can grab headlines with news of even considering bringing production to the U.S., and the Trump White House benefits from the ability to take credit. These moves may not add up to significant job growth, but it’s hard to beat the PR.”

Trump’s tweet, which was sent only half an hour after the article was posted, may lend credence to their theory.

Post-inauguration, Trump hasn’t yet turned his attention toward Korea, focusing mainly on domestic issues and trade with neighboring Mexico. But trade with the ROK was a regular component of his campaign addresses.

“We spend a fortune on defending South Korea. Now I order thousands and — thousands of television sets here, they come from South Korea. They make so much.  They’re making a fortune.  They’re a behemoth,” Trump said during the CNN-Telemundo Republican debate last February.

Samsung – which makes some of the televisions Trump may be referring to – already manufactures semiconductors at a plant in Austin, Texas in addition to its facilities in South Korea. Samsung has the largest Korean investment in the United States, and Korea as a whole is the 5th fastest growing source of Foreign Direct Investment into the country.

Trump Tweet

The electronics giant is hardly the only Korean company to consider moving more production to the United States in an effort to head off criticism from the new President – last week, Hyundai Motor Group announced that they plan to increase U.S. investment by 50 percent over the next five years, and may build a new plant to supplement the factory they currently have in Montgomery, Alabama. The company also applied for membership with the American Chamber of Commerce in Korea this year for the first time since 2008.

LG is also considering building a new plant in Tennessee for its TV and home appliances. “This is something that has been under consideration for years at LG, but the current political situation is simply accelerating that timeline for a decision,” according to a source close to the company told Reuters.

On a larger scale, the Korean government has indicated that they will encourage more imports from the United States to balance some of Seoul’s trade surplus. As part of this plan, the finance ministry announced that they will begin importing more U.S. shale gas to meet the country’s energy needs.

Whether Samsung goes through with plans to begin manufacturing appliances in the United States or just wants to stave off the ire of the White House remains to be seen. But the 60,000+ likes Trump’s one tweet got within hours of posting certainly can’t hurt either way.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Michael Newman’s photostream on flickr Creative Commons.

 

Posted in Economics, slider, South KoreaComments (0)

Growing Pains: The Case of Kakao

By Juni Kim

The runaway success of Kakao’s mobile messaging app can be easily seen by its near universal use in South Korea. From high school students to working professionals, three-quarters of South Korea’s 50 million residents use Kakao’s free messaging service monthly with an additional 10 million monthly users outside of South Korea. Despite rapid growth over the past decade, Kakao faced a daunting hurdle when the South Korean Fair Trade Commission (FTC) labeled it and other similarly sized companies as “big business groups” this past April. The new designation subjected Kakao to the FTC’s antitrust regulations, which also applies to South Korea’s much larger chaebol conglomerates like Samsung and Hyundai.

The FTC designation illustrates the fear that smaller Korean companies hold of potentially being caught by tighter regulations after continued growth. Companies like Kakao are caught in the crossfire of the Korean government’s efforts to promote growth in smaller firms while simultaneously attempting to manage antitrust regulations.

Criticism and controversy surrounded the new designation, which also labeled companies Celltrion, Harim Group, Korea Investment Holdings, Kumho Petrochemical, and SH Corporation as big business groups. Industry analysts noted the unfair grouping of Kakao’s total assets with much larger companies. According to Kakao’s website, the company’s total assets are about 5.19 trillion won ($4.5 billion US), easily dwarfed by conglomerate companies such as Hyundai Motor’s reported total assets of 165 trillion won ($143 billion) and Samsung Electronic’s assets of 230 trillion won ($200 billion).

Kakao Graph

In the wake of the FTC designation, the Federation of Korean Industries (FKI), a lobbying group for South Korean companies, released a report critical of the new designation. It stated that the designation excessively regulates companies like Kakao, citing the total of 60 newly assigned regulations authorized through 27 acts. Lee Chul-haeng, the FKI head of corporate policy, publicly stated, “We demand that the government either raise the asset floor for large corporation from 5 trillion won to 10 trillion won, or limit the list of large companies to the top 30 in terms of asset size.”

Concerns of excessive regulations on companies like Kakao have not gone unnoticed by South Korean President Park Geun-hye. Since March 2014, President Park’s administration has held five top-level meetings to discuss and encourage deregulation reform in an effort to encourage economic growth among burgeoning industries. The most recent meeting occurred at the Blue House only a few weeks after Kakao’s designation as a big business group. President Park specifically addressed Kakao’s growth challenges in that meeting by stating, “Companies like Kakao will be restricted if they are labeled as big business groups. In this situation, what company would want to continue to grow?” She further added, “Labeling big business groups as conglomerates is a system only found in Korea, and it needs to change according to the times.”

The FTC ultimately yielded and announced this month that the designation of big business groups will be changed from combined company assets of 5 trillion won to 10 trillion won, which effectively removes Kakao from the list. FTC Secretary General Shin Young-sun acknowledged industry criticisms of the previous designation by stating, “If the same level of regulation is applied to all these companies, it could affect the growth of the smaller members of the group, and we have decided to raise the standard.”

Kakao executives surely welcomed the news of the raised FTC designation. Kakao’s current plans for a web-based bank would have been subject to stiff restrictions if the FTC designation remained in place. However, challenges still remain for Kakao as it continues to expand. Despite its relative small size compared to larger chaebols, Kakao has been investigated before for possible abuses of its dominant market power in South Korea. Any further similar actions by Kakao may put it under the scrutiny of the FTC again and justify restrictive measures. Although it may be far from becoming its own chaebol, Kakao is not immune to future antitrust regulations.

Juni Kim is the Program Manager and Executive Assistant at the Korea Economic Institute of America (KEI). Jiwon Nam, an Intern at KEI and graduate student at the University of Maine, also contributed to this blog. The views expressed here are the author’s alone. 

Photo from Ben Hancock’s photostream on flickr Creative Commons.

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