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South Korean Telecoms Sector Hits a Rough Patch Amid Dwindling 5G Investments

The domestic telecommunications equipment industry in South Korea saw a lacklustre start to 2023, with performance declining markedly from the high points of Q4 2022. The deceleration was driven largely by a slowdown in 5G mobile communication investment by telecom companies and a change in market conditions, leading to divergent fortunes across the sector.

Data from the Financial Supervisory Service’s electronic disclosure system revealed a downward trend in Q1 2023, with many companies reporting operating losses or continuing to underperform compared to the same period the previous year.

Among the 17 listed firms excluding large enterprises in the Korea Network Industry Association, only five firms posted a surplus in Q1: Solid, Ubiquis, Innowireless, Piolink, and Wins.

Solid, the leading repeater company in Korea, and Innowireless, a subsidiary of LIG involved in communication test and measurement instruments, were major beneficiaries of the 5G investment, with sales growing 67.4% and 85.5% respectively YoY. Both firms shifted their focus from service range expansion to quality control, primarily centred on indoor transmission and reception rates improvement.

Kisan Telecom reported losses but demonstrated improved performance, with a substantial sales increase of 1335.3% YoY. Meanwhile, Ubiquos, focused on wired internet data transmission equipment, benefited from the resurgence in investment in 10Gbps internet, reflecting rising data usage, with sales and operating profit rising 7.3% and 24.8% respectively YoY.

However, firms like HFR, Eruon, and Uangel had a subdued quarter. These firms, specialising in wired and wireless access equipment, mobile communication solutions, and core network business, suffered declining sales and a shift from operating profit to loss.

Optical transmission equipment and module companies experienced mixed fortunes depending on their clientele. Koweaver, Telefield, and Lightron all reported sales decreases and continued operating losses. In a notable shift, Lightron recently acquired Wintech, a semiconductor and display inspection equipment company.

Companies targeting general firms also experienced challenges. Dabolink, Dasan Networks, and Dayou Plus all reported declining sales and continued operating losses.

Woori Net, an Internet of Things (IoT) communication equipment seller, despite reporting a 63.3% YoY increase in sales, continues to face operational losses. The company is in the midst of a potential change in ownership, which could affect future business operations.

Finally, CNT 85, another listed firm, has been undergoing changes following a shift in its largest shareholder and subsequent court receivership, underlining ongoing issues within the management of association members. The company’s performance highlights the challenges faced by the sector as a whole.

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