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Graphic by Jang Eun-yeong

Major South Korean companies including Samsung Electronics and Hyundai Motor recorded 117.1 trillion won (US$101.1 billion) in sales in China last year. The number was down by 6.9% from four years earlier, in 2016.

The Federation of Korean Industries (FKI) on Monday released results from an analysis of companies that had announced figures for sales in China from among South Korea’s top 100 companies according to overall sales. The findings showed that amid a decline in Chinese sales, the percentage of all overseas sales made in China for the 30 companies in question fell by 3.5 percentage points from 25.6% in 2016 to 22.1% in 2020.

The FKI said the trend reflects a drop in demand for South Korea-made memory semiconductors from Chinese companies such as Huawei amid US regulations on trade with China that have been in place since 2018. Last year, South Korea’s memory semiconductor exports to China fell by 29.1% compared with 2018.

According to figure from the Export-Import Bank of Korea quoted by the FKI, sales by local South Korean branches in China also slid by 21.1% from US$187 billion in 2016 — the equivalent of 225 trillion won by the end-of-year exchange rate — to US$147.5 billion in 2019 (171 trillion won).

In contrast, figures from the Japanese Ministry of Economy, Trade and Industry showed sales for all Japanese branches in China dropped by just 1.1% from 47.6 trillion (US$433.5 billion) to 47.1 trillion yen (US$428.9 billion) over the same period.

Total sales for Chinese subsidiaries of South Korean companies have been consistently in decline since peaking at US$250.2 billion in 2013.

Between 2016 and 2019, the operating profit margin for all Chinese branches of South Korean companies fell from 4.6% to 2.1%. In the case of Japan, the decline over the same period was relatively small, dropping from 5.5% to 5.3%.

South Korean brands have also lost some of their luster in China. According to China Association of Automobile Manufacturers figures, market share for South Korean automobile brands in China plummeted from 7.7% in 2016 to 4.0% for the months of January to September 2020.

Over the same period, market share for Japanese brands grew from 15.1% to 22.3%.

South Korean companies’ share of the Chinese cosmetics market also dipped from 27% in 2016 to 18.9% in 2020, while Japanese companies’ share rose from 16.8% to 24.8% over the same period.

The FKI also said that South Korea’s share of the Chinese smartphone market had fallen from 4.9% in 2016 to less than 1% as of 2019 amid an onslaught from Chinese competitors such as Huawei and Xiaomi.

South Korean direct investment in China totaled US$4.5 billion last year, down by 23.1% from the prior year. In the case of manufacturing businesses, it fell by 26.6% from US$5.43 billion to US$3.99 billion.

Kim Bong-man, head of the FKI’s international affairs department, said the trend is a result of “growing business risks with China following US measures to block China’s technological rise.”

He added, “[South Korea needs to] use formal and informal economic discussion frameworks between the South Korean and Chinese governments to resolve issues with doing business in China, while focusing on quickly concluding service and investment negotiations for the South Korea-China Free Trade Agreement.”

Service and investment sector negotiations for the South Korea-China FTA have been in progress for over three years since March 2018.

By Kim Young-bae, senior staff writer

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