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Samsung, LG increase R&D spending

Tech giants step up efforts to find new sources of growth

South Korean tech giants Samsung Electronics and LG Electronics have been ramping up efforts to find new cash cows with their quarterly R&D expenditure-sales ratio reaching an all-time high during the January-March period this year, according to their quarterly reports released Monday.

Despite a sales decrease in the first quarter this year ― from 54 trillion won in the first quarter last year to 47 trillion won ― Samsung spent 3.8 trillion won ($3.5 billion) for R&D. This only slightly down from 3.9 trillion won spent by the company in the corresponding period last year, according to the firm’s report.

Aided by the relative increase in R&D, the company’s ratio of R&D expenditure to revenue hit a record high of 8 percent in the first quarter, compared to 7 percent last year.

Not to be outdone, domestic rival LG Electronics increased its R&D budget to 1.1 trillion won in the same period, with the R&D expenditure-sales ratio standing at 7.2 percent, up from 6.2 percent last year.

The company’s move is in line with LG Group chairman Koo Bon-moo’s emphasis on R&D.

Koo urged the conglomerate’s top executives and employees to put focus on R&D by saying “R&D is necessary to produce the world’s leading products.”

Korea’s second-largest memory chip-maker SK hynix spent 427 billion won with its R&D expenditure-sales ratio clocking in at 9 percent, the highest among the tech companies.

“The uptick of R&D expenses of Korea’s tech giants is attributable to their efforts to increase their presence in the global market and to outpace rivals from China and the U.S., including Huawei and Apple,” a market watcher said.

Chinese telecommunications equipment and mobile device maker Huawei spent $6.6 billion on R&D ― 14.2 percent of its revenue ― in 2014, up 29 percent from the previous year.

The top three R&D spenders in the U.S. tech industry last year were Intel, Microsoft and Google, which spent $11.5 billion, $10.4 billion and $9.8 billion, respectively.

Apple poured around $1.9 billion on R&D in the first quarter of 2015 and around $6 billion on R&D in the fiscal year 2014.

By Kim Young-won (
Korea Herald Youtube