▲ AI PRISM* Personalized Economic Briefing
* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.
[Key Issue Briefing]
■ Deal Gap: Global M&A transaction value reached $2.003 trillion in the first half of this year, up 42% from a year earlier, while deals worth more than 5 trillion won have disappeared among Korean conglomerates. Critics say that while SpaceX, Google and Nvidia pour trillions of won into securing leadership in artificial intelligence, Korean groups remain confined to habitual portfolio restructuring such as selling stakes in affiliates.
■ Cash Paradox: Cash and cash equivalents held by the main affiliates of five groups, including Samsung Electronics (005930) and SK hynix (000660), stood at 325.1 trillion won in the first half of this year, up 110.4% in a single year. But with the government's corporate value-up policy stance, pressure from activist funds and union demands for higher performance pay all converging, critics argue that a significant portion of these funds is flowing into shareholder returns and internal compensation.
■ Wage Rigidity: With 83.1% of unionized companies with 300 or more employees still applying seniority-based pay scales, recruitment of talent and redeployment of workers are being blocked. Under a structure in which wages accumulate with length of service, labor-management negotiations are growing more rigid, and all-out disputes are recurring, particularly at large workplaces.
[News of Interest to Corporate CEOs]
1. Big Tech Strikes $2 Trillion in Deals While Korea Focuses on Shareholder Returns
- Key summary: Global technology giants are executing mega M&A deals in AI, power and infrastructure, while deals worth more than 5 trillion won have vanished entirely among Korean conglomerates. According to the investment banking industry and Samil PwC, global M&A transaction value reached $2.003 trillion in the first half of this year, up 42% from a year earlier, with megadeals of $5 billion or more accounting for 40% of the total. SpaceX spent $60 billion to acquire Anysphere, Google $32 billion for Wiz, and Nvidia about $12.9 billion for Hugging Face. In Korea, Samsung Electronics acquired Germany's ZF advanced driver assistance systems division and the Flakt Group for a combined 3 billion euros, but major groups including SK, Hyundai Motor (005380), LG (003550), Lotte and Hanwha (000880) have gone years without producing a global deal.
2. Holding 325 Trillion Won in Cash, Korean Groups Watch M&A From the Sidelines
- Key summary: Korean conglomerates have secured record firepower yet remain consistently on the sidelines of the mega M&A market. Cash and cash equivalents at five companies — Samsung Electronics, SK hynix, Hyundai Motor, LG Electronics (066570) and Hanwha Aerospace (012450) — totaled 325.1 trillion won in the first half of this year, up 110.4% from 154.5 trillion won a year earlier, with Samsung Electronics' 190 trillion won and SK hynix's 88 trillion won alone accounting for about 278 trillion won. Samsung Electronics, meanwhile, is estimated to execute more than 100 trillion won in shareholder returns this year under its policy of returning 50% of free cash flow, and SK hynix last month approved a 40 trillion won share buyback and cancellation plan. Over the same period, global M&A deals in AI and IT totaled about $641 billion, up 80% from a year earlier, in sharp contrast.
- Key summary: Korea's top 10 conglomerate groups have divested subsidiaries and business divisions worth 17 trillion won over the past two years. The figure is based on Seoul Economic Daily's Signal league table tally of 18 control-transfer transactions worth 17.7081 trillion won; including minority stake deals, the total is expected to exceed 20 trillion won. The most aggressive in shedding non-core assets was SK Group, which sold an 85% stake in SK Specialty for 2.7 trillion won and a 70.6% stake in SK Siltron for 2.3 trillion won, while SK Ecoplant secured 1.78 trillion won by selling three waste management subsidiaries. Excluding the humanoid robotics field — where Samsung Electronics acquired a 35% stake in Rainbow Robotics (277810), LG Electronics brought Bear Robotics in as a subsidiary and Hyundai Motor secured a 100% stake in Boston Dynamics — M&A for new businesses has been rare, analysts said.
[Reference News for Corporate CEOs]
- Key summary: Seniority-based pay scales, under which wages rise with years of service, are blocking corporate recruitment of talent and productivity gains, according to analysts. Ministry of Employment and Labor survey data on employment types and working conditions showed that workers in Korea with 10 to 14 years of service earned 1.95 times the wages of those with less than one year, rising to 2.28 times for 15 to 19 years and 3.08 times for 30 years or more, while the gap did not exceed twofold in Japan and several European countries. An analysis by the Korea Development Institute (KDI) of the OECD Survey of Adult Skills found that Korean workers with above-average numeracy and literacy earned only 2.46% and 2.01% more, respectively, far below levels in Germany and Japan. In addition, while 83.1% of unionized companies with 300 or more employees apply seniority-based pay, 63.4% of workplaces with fewer than 100 employees have no formal wage system at all, raising concerns that gaps by company size could become entrenched.
5. National Income Escapes the $30,000 Trap After 12 Years: "Potential Growth Must Keep Rising"
- Key summary: Behind Korea's per capita gross national income (GNI) breaking through the $30,000 barrier for the first time in 12 years lie the semiconductor supercycle and a stronger won. Second-quarter nominal GDP rose 26.4% from a year earlier on surging semiconductor export prices, but the domestic demand deflator rose just 3.6%, one-sixteenth the increase in the export deflator. Total operating surplus in the second quarter rose 18.5% from the previous quarter, the highest growth rate since the statistic was first published in the second quarter of 2010. Compensation of employees, the household share, rose just 1.9%. The gross savings rate hit 45.6%, the highest since the data series began in 1970, while the gross domestic investment rate fell to 24.2%, a 51-year low. On the growth path, the Bank of Korea projected this year's growth at 3.3% and KDI at 3.2%, revealing differing views.
6. "Once Raised, It Can Never Come Down": Labor and Management Repeat Extreme Standoffs
- Key summary: Seniority-based wage structures combined with a bargaining framework centered on company-level unions are making wage negotiations increasingly rigid. According to the Ministry of Employment and Labor, workplaces with 1,000 or more employees accounted for 41.5% of all labor disputes last year, up 11.2 percentage points from 30.3% in 2021. A Korea Labor Institute survey found that the probability of a strike occurring fell to 1.3% in 2023 from 3.5% in 2021, while union member participation at struck workplaces jumped to 92.9% in 2023 from 52.5% in 2017. Wage-related items rose to 100% of the reasons cited for strikes in 2023 from 63.8% in 2011. Meanwhile, under the revised trade union law that took effect in March this year, restructuring can now become a subject of industrial action and subcontractor unions can bargain with prime contractors; as of the 14th of last month, 456 prime contractor workplaces had received bargaining demands from 1,218 subcontractor unions.
▶Read the article: [Exclusive] Capital Firms' Short-Term Bonds Surge 35%, Worsening Maturity Structure Amid High Rates
▶Read the article:Holding 325 Trillion Won in Cash, Korean Groups Watch M&A From the Sidelines [Signal]
▶Read the article: National Income Escapes the $30,000 Trap After 12 Years: "Potential Growth Must Keep Rising"
