SK Group Chairman Chey Tae-won’s so-called ‘China Insider’ strategy to construct a 2nd SK Group in China has gained ground. The group’s subsidiaries, including SK C&C, have strengthened their presence in China, but the leadership void, created by Chairman Chey’s absence, is being felt even more.
SK Group has been pushing ahead with the long-term strategy to make its operations recognized as locally homegrown companies, not as foreign concerns, group officials said.
The business group has been accelerating its efforts to forge win-win relationships by setting up joint ventures with Chinese companies, and it is sticking to a principle of reinvesting the money it has earned from China, according to the officials.
Early this year, SK Group established a trust to offer scholarships, conduct life-saving activities in the face of natural disasters, support public entities, and be engaged in other social contribution activities.
An example of the projects Chairman Chey had been pushing under the China Insider policy were SK Global Chemical Co.’s Wuhan project, which was launched this past January as part of the business group’s efforts to explore the Chinese energy market in a full-blown manner. The deal calls for SK Global Chemical’s construction of a naphtha-cracking plant with an annual production capacity of 2.5 million tons together with Sinopec, the largest Chinese state-run petroleum group, and British oil firm BP at a cost of 3.3 trillion won.
In 2008, SK E&S invested 360 billion won to take a 16.6 percent stake in China Gas Holdings. The Chinese city gas company has risen from fourth place to top position. China Gas Holdings has seen the number of households it supplies make a 26-fold jump from 267,000 in 2004 to 7.19 million in 2012.
SK Hynix, one of the group’s promising subsidiaries, is on a roll in China. SK Hynix’s semiconductor plant suffered a setback when it was hit by a fire last year. The plant returned to normal thanks to support from the company’s headquarters in Seoul. SK Hynix’s successive stock price highs may be construed as an indication of the early normalization of the semiconductor plant in China. SK Hynix’s plant in China has emerged as a semiconductor maker with the highest sales there.
SK Innovation established Beijing BEST Technology, an EV battery joint venture with Beijing Automotive Industry Holdings Co. (BAIC) this past January, a move to make an inroad into the world’s largest EV battery market.
SK C&C, at the top of the group’s management structure, has jet set foot in China. SK Group Chairman Chey sold off his SK C&C shares to Hon Hai Group of Taiwan this past June. Hon Hai Group is the parent company of Foxconn, the world’s largest OEM company.
With Hon Hai Group becoming one of SK C&C’s shareholders, SK C&C, which is seeking to explore new growth engines in ICT, will likely land factory automation facility projects from Foxconn in China, a move to depart from the saturated Korean SI market.
SK C&C’s 1st quarter performance was beyond expectations. The Korean IT service provider chalked up 523.8 billion won in sales and 55.5 billion won in operating profit in the first quarter of the year, a 3.2 percent rise and a 42.7 percent surge over the same quarter of last year, respectively. Even though market conditions were not favorable, improved profitability led to a jump in operating profit. The business performances were extraordinary, given the fact the IT service provider industry is stagnant and restrictions on sharing businesses among subsidiaries of conglomerates have become more stringent.
Look at SK C&C’s business performances, the non-IT sector, including the used car business, has gained more ground than the traditional mainstay IT field. Sales in IT, accounting for half of its yearly total sales, shrank in the first quarter of the year, compared to the previous quarter, whereas the non-IT sector saw sales surge 24.2 percent. By area, the logistics sector, including used cars, saw sales surge some 24 percent, with a 20-percent jump in sales in the security service sector and a 1.6-fold surge in sales in the content sector. These charming performances were owed to SK C&C President Chung Chul-khil’s strategy to secure profitability and explore overseas markets, including China, since he took office in 2011.
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