Samsung Electronics and LG Electronics face inevitable profit declines from falling sales and rising logistics costs if the war triggered by U.S. and Israeli strikes on Iran becomes prolonged.
According to industry sources on the 4th, Samsung Electronics and LG Electronics have effectively suspended operations in the Middle East since the regional crisis erupted on the 28th of last month (local time).
Both companies have evacuated Korean employees from Iran and Israel to neighboring countries and shifted to remote work at Middle Eastern offices under threat from Iranian missile and drone attacks. An industry official explained, "Iran and Israel have essentially shut down as nations, and business operations in neighboring countries are also difficult. Employee safety is the top priority, so operations can only resume when it becomes completely safe."
Observers predict that Samsung Electronics and LG Electronics will be unable to resume Middle East operations for at least one month. This follows U.S. President Donald Trump's public statement that the war with Iran could last four to five weeks or longer.
The longer the Middle East remains engulfed in conflict, the greater the sales impact on both companies. According to industry data, LG Electronics derives approximately 17% of its revenue from Asia and Africa markets. LG Electronics is particularly pursuing a "Global South" strategy to expand sales in Brazil, India, and Saudi Arabia.
According to market research firm Omdia, Samsung Electronics held approximately 36% of the Middle East smartphone market in the fourth quarter of last year, ranking first. The company is also participating in the smart city project for NEOM, which Saudi Arabia is developing. Consequently, if the war spreads across the entire Middle East region, sales declines and disruptions to existing projects are expected.
Concerns are also emerging that instability in the Strait of Hormuz, a key oil transit chokepoint, could add trillions of won in additional oil and logistics costs. In the third quarter of last year, Samsung Electronics spent 1.8318 trillion won on shipping costs, while LG Electronics spent 2.2683 trillion won.
An industry official predicted, "When quarterly or semi-annual logistics contracts expire and new contracts are negotiated, shipping costs could skyrocket."
