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R&Ds

Chips, EV and AI lead Korean firms' 2020 R&D spending

Apr 05, 2021 (Gmt+09:00)

Samsung Electronics' semiconductor R&D workers
Samsung Electronics' semiconductor R&D workers
Semiconductor chips, electric vehicles and artificial intelligence (AI) drove the top 100 South Korean companies' spending on research and development (R&D) to a record 49.5 trillion won ($44 billion) in 2020.

Despite the spread of the global pandemic, slightly more than half of the 100 largest companies spent more on R&D than 2019, with a focus on future growth drivers including aerospace and renewable energy, according to the regulatory Financial Supervisory Service (FSS) on Apr. 4. 

Their 2020 R&D expenditure in total marks a 3.7% increase from a year earlier, accounting for 2.2% of total sales, unchanged from the previous year's. The 100  companies were based on 2019 sales, among those listed either on the country's main bourse, or the junior stock market. State-owned companies and financial companies were excluded. 

R&D spending by Korean firms is expected to pick up further this year, with the big businesses setting their sights on new growth drivers, as their current mainstay areas are slowing down in revenue growth amid the contactless trend. A generational leadership change at family-owned conglomerates over the past few years prompted their advance into new territory. 

Hyundai Mobis Co., an automobile parts supplier, joined the ranks of companies with over 10 trillion won in R&D spending, driven by its heavy investments in self-driving technology and in-vehicle infotainment components such as audio, video and navigation systems. 

 South Korean companies with over 1 trillion won in R&D spending in 2020:
Company
R&D spending
Samsung Electronics 21.2 trillion won
LG Electronics 4.0 trillion won
SK Hynix 3.5 trillion won
Hyundai Motor 3.1 trillion won
LG Display 1.7 trillion won
Kia 1.7 trillion won
Naver 1.3 trillion won
LG Chem 1.2 trillion won
Hyundai Mobis 1.0 trillion won
Source: FSS

By business group, the top four names -- Samsung, Hyundai Motor, SK and LG -- took a vast majority of the spending, or slightly over 80%, at 41.1 trillion won. Samsung Electronics alone made up 43%. The world's largest memory chipmaker's R&D expenditure in 2020 set a record for a fourth consecutive year since 2017.

"We have been investing in new businesses such as AI and automotive parts, along with investments in the semiconductor to maintain a wide lead over rivals," said a Samsung source.

Among other conglomerates, Hanwha, POSCO and Hyosung groups are accelerating their push into future growth areas. In particular, Hanwha Aerospace Co. poured 462.4 billion won into R&D, or 8.7% of sales. Its sister company Hanwha Solutions Co. spent 124.8 billion won on its solar technology. The two Hanwha units and affiliate Hanwha Corp were among the top 10 Korean companies with the highest R&D ratios against sales.

Last year, POSCO spent 21% more on R&D at 655.3 billion won than a year before as the country’s largest steelmaker is fostering battery materials for EVs as its next growth engine.

In terms of R&D spending versus revenues, Naver, an internet giant in Korea, has allocated a quarter of its sales to R&D per year since 2017. That is a high percentage level even compared to global counterparts such as Google Inc. and Amazon.com. 

Companies with high R&D ratios:
Company R&D expense to revenue ratio (%)
Naver 25.1
Kakao 12.9
SK Hynix 10.9
Samsung Electronics 9.0
Hanwha Aerospace 8.7
Source: FSS

Companies with large year-on-year R&D spending growth in 2020:
Company  Net increase vs 2019
Samsung Electronics 1,021.5 billion won
SK Hynix 293.4 billion won
Naver 236.2 billion won
POSCO 113.8 billion won
Samsung SDI 95.7 billion won
Source: FSS

By contrast, 47 companies in the top 100 curtailed R&D budget in 2020 to concentrate on saving their businesses in the pandemic-stricken economy. In particular, Doosan Group saw the biggest year-on-year drop in R&D expenditures among the 100 companies, or a 160 billion won decrease, due to its liquidity constraints.

Write to Kyung-Min Kang at kkm1026@hankyung.com

Yeonhee Kim edited this article.

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