When learning about South Korea’s rapid economic transformation, one group of re-occurring characters will be the chaebols (재벌). Chaebols are the large, family-ran business conglomerates that largely dominate the South Korean economy. In 2021, the revenue of the largest ten chaebols, which include Samsung (삼성), Lotte (롯데), and LG (엘지), made up about 60% of the country’s GDP. Even during the Covid-19 pandemic, while smaller business struggled to survive, the chaebols have remained strong.
Chaebols and the government in South Korea go hand-in-hand
The relationship between the South Korean government and chaebols has existed for a very long time. In the 1960s, South Korea was considered one of the poorest countries in the world. Its GDP per capita in 1960 was about 160 USD and the country depended on foreign aid. With the rise of then military dictator Park Chung Hee, the country was aiming to industrialize and grow into a major economic power.
This led to rise of chaebols who would work together with the government to achieve that goal. The government would provide economic support to select companies in specific industries like cars and electronic goods, while the companies would work alongside the country’s economic plans. Even with the end of the dictatorship in 1988, the chaebols remained economically powerful as the country continued to grow and have received governmental support. For instance, although they have been at the center of many corruption scandals, many have been pardoned by the government. In 2022, under President Suk Yeol (윤석열), Samsung Chairman Jay Y. Lee (이재용) and Lotte Group Chairman Shin Dong Bin (신동빈) were released on parole in consideration of the struggling economy.
Samsung, SK, Hyundai Motors, LG, and Lotte are the top chaebols in South Korea
Samsung (삼성) is the leading player among the chaebols. It has been widely successful, contributing to the economic growth of South Korea. In 2021, the revenue of 15 of its affiliated companies made up about 20.3% of South Korea’s GDP. Samsung is then followed by SK (에스케이), Hyundai Motor Company (현대자동차), LG (엘지), and Lotte (롯데).
Source: Newsis (2022), modified and re-designed by daxue consulting, top 10 business groups in South Korea by total assets
Samsung and its transition from selling groceries to advanced technologies
Samsung (삼성), the leading player among the chaebols, was not always recognized for its technology. Founded in 1938, Samsung started as a grocery trading store by Lee Byung Chul (이병철), the grandfather of current Chairman Lee Jae Young. It mainly traded noodles and other goods in the city of Daegu (대구), nearby areas, and China. Over the years, it has diversified into other industries including electronics, machinery and heavy industries, and financial services across numerous countries in the world like the US, China, and Germany. In 2022, Samsung ranked 8th in Forbes’ “world’s most valuable brands”, with a brand value worth USD $50.4 billion and brand revenue of USD $209.5 billion.
Source: SAMSUNG GSG (left), designed by daxue consulting, Samsung and some of its affiliated companies by category and Samsung (right), products with CES recognition for their distinctive design and engineering
SK (에스케이) and its businesses in semiconductors and telecommunications
In 2022, SK (에스케이) ranked up to second place in terms of assets in South Korea for the first time in history since its founding in 1953, surpassing Hyundai Motor Group. It has businesses in semiconductors, energy and chemicals, telecommunications, among others. SK telecom (에스케이 텔레콤) is widely known in South Korea as one of the largest three Internet service
providers in South Korea, after KT (케이티) and LG U+ (엘지 유풀러스).
Source: SK Inc., modified and re-designed by daxue consulting, SK and some of its affiliated companies by category
Hyundai Motor Company is much more than an automobile company
Chaebol Hyundai Motor Company (현대자동차), founded in 1967, is known for manufacturing and distributing whole and parts of automobiles. It owns the popular brands Kia (기아), Hyundai (현대), and Genesis (제네시스). Among the domestic brands, they had the largest number of car sales in September 2022. Besides the automobile industry, they are also involved in finances, IT/software, and logistics. Hyundai Card (현대카드), a credit card company under the chaebol, issues many of the credit cards in South Korea. It is claimed that they are working to help launch Apple Pay in the end of 2022.
Lotte and its limitless presence among South Koreans and the world
Lotte (롯데) has major businesses in food, retail, tourism/service/finance. It is the owner of Lotte Confectionary (롯데제과), Lotte Duty Free (롯데면세점), Lotte World (롯데월드), among many others. In addition to the large presence in the South Korean F&B market, Lotte Confectionary is successfully going global, with a doubled quarterly net profit from 2021 Q2to 2022 Q2. Its ice cream products are especially in-demand in India, Russia, and Kazakhstan. Lotte is also the owner of department stores, duty free shops, and hotels, contributing to the growth of South Korea’s luxury goods market, South Korea’s airline industry, and South Korea’s beauty market.
Image Source: TMON (left), The Korea Economic Daily (center), VIP Travel (right)
Key takeaways on chaebols in South Korea:
- In South Korea, chaebols (재벌), are key-players in the country’s economic development. They’ve had a long and strong relationship with the government – both positive as they contributed to the rapid growth of Korea and other times negative as they have been involved in many corruption scandals.
- Samsung (삼성), SK (에스케이), Hyundai Motors (현대자동차), LG (엘지), and Lotte (롯데) are the top chaebols in South Korea. They have existed since the 1900s and have remained in powerful positions today.
- The leading chaebol in South Korea is Samsung (삼성), who contributes to about 20% of South Korea’s GDP. They initially started selling foods and the like, and now have businesses in other industries like electronics and machinery and heavy industries.
- Samsung is followed by SK, Hyundai, and Lotte who have numerous across industries. They are everywhere too – in the ice cream bought at the supermarkets to the wireless Internet that allows people to communicate in Korea’s subway system.