Despite 'Exchange Rate Risks' in Industry... Games and Bio Sectors Expect Foreign Exchange Gains

Major Korean Game Companies Including Netmarble
Over Half of Revenue from Overseas Sales
Most Revenue from Exports in Bio Sector
Samsung Biologics Expected to See Profit Increase

[Asia Economy Reporters Gwanju Lee, Seungjin Lee] The rise in exchange rates is expected to act as a boon for certain industries such as gaming and bio. Thanks to their export-oriented sales structure, the higher the KRW-USD exchange rate rises, the more foreign exchange gains they can enjoy.

According to the related industry on the 24th, many major domestic game companies have overseas sales accounting for more than 50% of their total sales. In particular, these game companies mainly target the North American market and provide game services there, so significant foreign exchange gains are expected when converting overseas sales into Korean won.

In the case of Netmarble, about 73% of total sales last year were generated overseas, and the proportion increased to 84% in the first quarter of this year. Especially, the North American region accounted for nearly half at 49%. This is due to the reflection of the performance of SpinX, the world's third-largest social casino game company acquired in August last year, from the fourth quarter. In addition, Netmarble services games such as "The Seven Deadly Sins: Grand Cross" and "Blade & Soul Revolution" in the North American market, and recently released "Ni no Kuni: Cross Worlds." However, the dollar-denominated loan taken out when acquiring SpinX is becoming a burden. Netmarble secured more than 1.6 trillion KRW of the approximately 2.5 trillion KRW acquisition cost through domestic and foreign bank loans during the 100% acquisition of SpinX shares. Although the interest rate is relatively low at the low 2% range, the recent sharp rise in the KRW-USD exchange rate has increased the loan burden. Nevertheless, since nearly half of total sales are generated in North America and "Seven Knights Revolution" is scheduled to be released next month, the overall situation is evaluated positively.

Other game companies are also expected to enjoy spillover benefits due to their high overseas sales ratios. As of last year, Wemade recorded 72%, Pearl Abyss 81%, and Smilegate 84% (as of 2020) in high overseas sales ratios. Most of these game companies are focusing on the North American market.

Nexon, headquartered in Japan, is also expected to benefit from the weak yen trend recently continuing, resulting in spillover gains from the strong dollar. Nexon's overseas sales ratio last year was 47%, and it plans to release the new fighting game "DNF Duel" to the global market on the 28th.

Bio companies also expect the rise in exchange rates to serve as an opportunity, as most of their sales come from exports. Samsung Biologics, a leading domestic bio company, projected in its business report that if the exchange rate rises to the 1,330 KRW level, net profit would increase by approximately 63.8 billion KRW. A bio industry official explained, "Although there is a burden on the supply price of raw materials, it does not constitute a large portion of production costs due to the nature of the business," adding, "Since it is an export-oriented industry, it is not expected to be greatly affected."

Among bio companies that have signed technology export (license-out) contracts, there is even a welcoming atmosphere toward the rise in exchange rates. This is because milestone and royalty amounts increase, leading to an actual increase in profits. Lee Sang-hoon, CEO of ABL Bio, said, "Before a global financial crisis-level exchange rate rise hits, we secured considerable cash through license-out deals," adding, "Since all payments are received in dollars, foreign exchange gains are generated, putting us in a comfortable situation."