Conglomerates aim to tackle economic uncertainties with new cash cows

Samsung, SK, Hyundai and LG — the nation’s four largest conglomerates – are betting big on finding the next cash cow business, in a preemptive bracing for economic slowdowns here and abroad in 2024, according to industry officials, Friday.

They are moving to place their management focus on securing new growth engines, as the economy heads for a structural slowdown. The same outlook is shared across major developed economies amid prolonged high-interest rates, which pose a threat to export-driven Korean conglomerates in particular.

Samsung Electronics, the nation’s largest firm by market capitalization, took necessary steps at a critical time when the firm’s chip business suffered a drastic earnings loss due to sluggish semiconductor demand.

In a year-end organizational reshuffle, the company established new units – such as future business planning, which is directly managed by Samsung SDI Vice Chairman Jun Young-hyun. The move is seen by many market insiders as a strategic action to find a new cash cow that will replace conventional revenue streams in the firm’s major tech businesses, such as chips, electronics and mobile devices.

“The decision reflects on growing fears of economic downturn across the globe,” an official from a Korean conglomerate said. “As the macroeconomic uncertainty is showing no clear signs of abating soon, other big companies are also following in similar footsteps, so they reduce their reliance on conventional businesses.”

SK Group also carried out a drastic reshuffle of top management. The company presented its management vision to turn its battery, bio and chip businesses into its midterm growth engine. Earlier, the company shared the plan of investing 247 trillion won ($191.47 billion) until 2026.

SK Group Chairman Chey Tae-won has also repeatedly delivered a sense of crisis amid ever-growing management risks triggered by multiple external uncertainties – such as geopolitical conflicts and prolonged economic slowdown.

Hyundai Motor Group is also going all out for a timely software-defined vehicle (SDV) transformation. The transition is one of Hyundai’s top priorities for 2024 amid toughening market competition for electric vehicles and hybrid vehicles. Hyundai is standing preemptively at the forefront of leading the production and development of SDVs.

LG Group is accelerating its transition into a provider of state-of-the-art vehicle component devices. LG Electronics’ vehicle component solutions unit is one of LG’s next major cash cows, helping the firm generate solid earnings. The unit is forecast to have achieved an accumulated order worth 100 trillion won by the end of 2023, up by around 25 percent from a year earlier.