By Ebrahim Fallahi

S. Korean companies leave Iran: Such a pity! But for them

February 18, 2020 - 15:44

TEHRAN – South Korea’s LG Electronics and Samsung have ended their presence in the Iranian market over the past few months, abiding by the U.S. pressures for cutting ties with one of their biggest markets.

This is not the first time that South Korean companies are turning their backs to Iran, assuming that whenever the condition is calm again they will be able to come back easily and Iran will accept them with open arms.

This time, however, the situation seems to be different, Iranian officials have warned the Asian companies that they won't be welcomed back even if the U.S. sanctions are removed.

But, who really is on the losing side of this whole situation? Iranian customers and consumers of the South Korean products or the companies that are facing the loss of an 80-million market?! This question is fairly easy to answer.

S.Korean companies in Iran

South Korean companies have been, for long, big players in the Iranian home appliances and electronics market. 

Huge companies like Samsung and LG Electronics and even carmakers like Hyundai and KIA Motors have had a great share in the country’s market and Iranian consumers have always welcomed the Asian country’s brands.

According to the official data, South Korean brands have had a grip on over 30 percent of Iran’s home appliance and electronics market on average and in some areas their share has been even more than 50 percent.

The Asian country, however, has been one of the most conservative trade partners of Iran when coming to the U.S. bullying. After the re-imposition of the U.S.

sanctions on Tehran, South Korea was the first country to withdraw from the Iranian market without any resistance, the country stopped its oil imports from Iran immediately after the U.S. threatened Iranian oil buyers to pull back from the Iranian market.

Now the time has come for LG and Samsung to give in to the U.S. pressures despite their great interest in staying in the Iranian market. The two companies officially cut their trade relations with Tehran in the past months, submitting to U.S. sanctions imposed on Iran after Washington withdrew from the 2015 nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA).

The “no-return” departure

The withdrawal from the Iranian market is going to cost the South Korean companies a great deal. Considering Iran’s huge market for electronics and home appliances and with regard to the strong presence of Korean companies in this market, leaving Iran would be a significant hit to the mentioned companies’ revenues in the region.

The reaction of Iran to this withdrawal, on the other hand, is yet another blow to the mentioned companies since returning to the Iranian market is not going to be as easy as the previous times.

Earlier on Sunday, Iranian Deputy Foreign Minister Abbas Araqchi warned that companies that accompany the U.S. in its “maximum pressure” policy against Iran and leave the Iranian market will face difficulty to return to the country in the future.

“The companies which left Iran have lost a market that cannot retake easily,” Araqchi said.

He added that Iran will not forget the countries’ behavior in difficult times.

Foreign Ministry spokesman Abbas Mousavi also said via Twitter on Friday that “Some foreign companies, which have left Iran in recent years and months submitting to the U.S. bullying, should know that returning to the Iranian market will be very difficult.”

According to trade principles, keeping one’s foothold in a country’s market is harder than entering it, Mousavi said.

So it seems that making the decision to leave Iran cannot be considered the safest option for conservative Korea, this time!

A chance for domestic brands to flourish 

The withdrawal of Samsung and LG from Iran not only is not a bad thing for the country but can be considered a blessing for the domestic production sector.

Iran was among the top producers of home appliances in the Middle East for more than 85 years and long before the establishment of companies like Samsung and LG, major Iranian companies were mass-producing home appliances.

Therefore, the departure of the Asian companies from the Iranian market can be considered a new opportunity for domestic companies to, once again, come to the spotlight for showcasing their capabilities and benefit from a market that belongs to them.

According to Alireza Mousavi Majd, Chairman of the Board of Directors of the Iranian Association for Audio and Video Accessories, the infrastructure left by Samsung and LG will be used by their Iranian subsidiary companies, namely SAM Service and Goldiran, to manufacture home appliances and electronics such as TV sets and computer monitors.

As reported, the mentioned companies will continue production, under new brands of Sam and Gplus respectively, by relying on domestic production lines and by turning to alternative international trade partners like China.

Final thoughts

Leaving Iran will definitely be a great loss for South Korean companies and they will soon come to regret this decision. 

They will definitely be back to reclaim their market share in Iran in the future, but, what is important here, as repeatedly noted by senior officials, is not to forget those who abandoned us in the hardship.

The mentioned companies’ withdrawal from the Iranian market should become, as it already is, a new chance for Iranian producers which have been pushed aside, for long, by such foreign competitions.

The Iranian government should support the domestic producers to gain their footsteps in the market, and the companies should, on the other hand, take all necessary measures to present such high-quality products to the market that satisfy the Iranian customers and encourage them to back their national interests.

EF/MA


 

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