By Lee Min-hyung
Donald Trump’s surprising victory is creating growing uncertainty for Seoul-based electronics giants Samsung and LG, because his protectionist economic policy and antipathy for renewable energy are expected to deal a severe blow to the IT firms and their parts-making subsidiaries, industry insiders said Thursday.
Shares of Samsung Electronics and LG Electronics dropped Wednesday amid their concerns, after Trump was confirmed as the next U.S. president. Samsung Electronics closed at 1.596 million won ($1,389), down 48,000 won, or 2.92 percent, from the previous day. LG Electronics shares closed at 45,700 won, down 4.29 percent.
Market insiders voiced concerns over the long-term effects the election results will have on Korean technology firms whose revenue streams are heavily reliant on the American market.
“As Samsung and LG are focusing on selling high-priced, premium devices in the U.S., they are unlikely to be hit hard by exchange rate fluctuations,” an electronics industry source said, asking for anonymity.
“But they have to pay close attention to how Trump’s protectionist stance develops down the road, as both firms do not have any manufacturing facilities there. Chances are that the Trump administration implements a tax hike not just on Samsung and LG, but on other non-American corporations.”
The biggest risk comes from the uncertainty, as it has yet to be confirmed whether Trump will be able to turn his campaign pledges into reality, according to the source, who said there is little the Korean firms can do.
For both of the Korean technology titans, the North American market is a crucial revenue source. Samsung Electronics posted 42.5 trillion won in sales in the market, while LG Electronics’ sales were some 16.4 trillion won, hovering around 30 percent of their global totals.
Such heavy reliance on the U.S. creates a gloomy outlook for the two firms, as Trump pledged to charge a 35 percent tax on imported goods from Mexico. Both companies’ manufacturing facilities in Mexico ship electronics devices to the U.S.
Another fear factor comes from Trump’s stance on energy industries. In a campaign promise, he pledged to revive coal and other fossil fuels, which raises concerns that this will harm the renewable energy sectors.
In particular, local battery makers ― LG Chem, Samsung SDI and SK Innovation ― are expected to be hit hard by the uncertain energy outlook, as their major revenue sources are from batteries for electric vehicles (EV). Shares of LG Chem, one of the world’s largest EV battery manufacturers, were down 4.16 percent, or 10,500 won, closing at 242,000 won on Wednesday.
“It still remains to be seen how Trump’s stance on energy will affect the industry, but his victory is not a good sign for battery makers,” said another source.
“No specific plan has yet to be confirmed, but given his emphasis on fossil fuels, this may put the brakes on battery firms’ expansion into the U.S. market to some extent.”