Samsung, the manufacturer that delivers 12.5 percent of South Korea’s annual GDP and 45 percent of its exports, continues to lay off workers as the number of coronavirus cases passed 1,500 last week, growing thirtyfold in a matter of days.
The company, which employs more than 180,000 nationwide, closed one plant after a worker tested positive for the virus and the other 1,500 workers were sent home under quarantine for two weeks.
If the virus spreads unchecked, Samsung could close more chip-making plants for longer periods, which would be “the worst-case scenario for the Korean economy,” said Park Chong-hoon, research director for Standard Chartered Bank in Seoul.
Samsung’s computer chips make up 20 percent of the country’s exports, 12 percent of South Korea’s corporate tax revenue, and 25 percent of the capitalization in its main stock market.
Tens of thousands of other workers make parts that supply Samsung factories. “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 for some parts,” according to Kim Yung-woo, an analyst at SK Securities.
The computer chip market softened in 2019, but Samsung and South Korea were counting on a rebound this quarter to buoy government revenues and business investment.
Based on that expectation, in December, the government predicted 2.2-percent GDP growth for 2020. Analysts now believe the rate will be less than 1 percent for the year after contracting by -.04 percent or more this quarter.
