The Significance of Samsung as A Major Driving Force in The Ever Growing Economy of South Korea

Samsung as a technology company is seen as one of the top companies in the eyes of the world. As a scholar from Universitas Airlangga, the writer too shares the excitement and views Samsung as a powerhouse, but the power that Samsung holds as a corporation in its home country is not to be taken lightly. With all its subsidiaries, Samsung has a hold of almost everything that coexists in South Korea, forging a deep connection with local communities. 

Samsung's weight on South Korea's economy is bigger than what is projected to the international eye. The advancements that Samsung has brought over the years have given many advantages to the increasing earnings of its motherland's income. Described by CNN Business in February 2017 as one of South Korea's chaebols--large conglomerates typically controlled by family--Samsung stands as a cornerstone of the country's economic landscape. 

Ever since the 1960s, Samsung's fortunes have been closely interlaced with South Korea's economic development. Co-founder Lee Byun-Chul's persuasive efforts with former president Park Jung-Hee led to favourable tax policies for companies, fostering a climate ripe for business expansion. Samsung took the opportunity it was given and diversified into sectors like banking, real estate, retail, insurance and electronics. In the 1970s and 1980s, the government's focus on heavy and chemical industries, coupled with strict licensing, favoured key players like Samsung, which expanded into sectors such as Samsung Petrochemical, Samsung Semiconductor, and Samsung Heavy Industry.

With the government's support in the form of tax breaks, subsidised loans, and favourable trade terms, Samsung thrived, contributing significantly to South Korea's rapid economic growth from the 1960s to the 1990s. This growth was propelled by innovation and technology, areas where Samsung excelled (Santacreu & Zhu, 2018). Leveraging export incentives, which gave them a huge amount of profits from supplying materials to the Middle East, and taking advantage of cheap loans, Samsung weathered the Asian financial crisis. They also played a crucial role in South Korea's recovery, tripling the country's GDP in the process. Throughout its history, Samsung has been the knight in shining armour in South Korea's economic journey, from post-war reconstruction to navigating modern financial crises (Pham, 2018).

The Republic of Korea, also known as the "Republic of Samsung" (Pesek, 2014) is a nation where large corporations run the country. Accounting for 13% of South Korea's GDP back in 2018, Samsung is the largest chaebol, operating across various sectors from electronics to professional sports teams and life insurance (Buchholz, 2019; Ullah, 2017). Samsung's presence extends from hospitals to universities associated with the brand, shaping the daily lives of South Koreans (Ullah, 2017). 

Referred to half-jokingly as the "Republic of Samsung", the company's products are all over the country, from household appliances to smartphones and tablets (Ullah, 2017). However, Samsung's dominance also evokes concern, as demonstrated by the anxiety sparked by incidents such as the Galaxy Note 7 explosions (Choe, 2016). Former president Moon Jae-In emphasised that Samsung's troubles affect the entire economy, reflecting the pride South Koreans take in the brand (Choe, 2016). Yet, Samsung's power also invokes fear, as shown by the controversial book written by Samsung's former chief lawyer, Kim Yong-Chul, titled "Think Samsung" ("삼성을 생각한다"), to which newspapers opted to omit advertisements fearing potential retaliation from Samsung (Kim, 2015). 

Could Samsung's operations pose a threat to South Korea's GDP? "As goes Samsung, so goes South Korea" (Pesek, 2019), the connection between the two is undeniable. Back in February 2020, the impact of the Coronavirus on Samsung's production shows potential risks. When an employee working in its Gumi smartphone manufacturing plant tested positive for the virus, production came to a standstill, leading to all other 1.500 employees being quarantined in their own home for two weeks (Song & White, 2020). 

Park Chong-Hoon, head of research at Standard Chartered in Seoul, said that further disruptions could harm the country's fragile economic recovery. Analysts remained vigilant, while Samsung downplayed the risk, anticipating shutdowns if the virus persists unchecked. An analyst at SK Securities, Kim Young-Woon, said, "If just one of the key domestic parts makers suspends production, it will wreak havoc on the entire supply chain, as Samsung has sole vendors on some parts." This statement emphasises the impact of Samsung's operations on the country's economic stability.

But this one case could not bring down Samsung's profits, Samsung Electronics proved to the whole world that even when a pandemic is occurring, its profits could still rise with its high demand for memory chips. Samsung's profit rose to 5.56 trillion won (7.3%) in the April to June period. According to Lee (2020), "it (Samsung) is crucial to the South's economic health." South Korea, which was facing a recession because of plunging exports, was yet again saved by Samsung and its responsive feedback to the challenges through its extensive global supply chain. With the surging demand for online activities, Samsung Electronics' chip business helped save the country's economic state.