Embracing the Kaesong spirit

Industry

Embracing the Kaesong spirit

Published: 13 Jun. 2010, 22:34

There’s an old Korean saying that the most talented merchants on the peninsula hail from the industrial city of Kaesong, which today lies just across the border in North Korea.

Lee Hoi-rim - late chairman and founder of OCI, which was formed in 1959 as Oriental Chemical Industries - gives that notion some weight.

Born in Kaesong in 1917, Lee started his professional career shortly after finishing elementary school as a clerk at a store that sold silk. He experienced the intricacies and financial complexities of the business world first-hand by putting in an ample amount of elbow grease on the ground floor, learning from Kaesong merchants themselves rather than at a prestigious and pricey business school. The lessons he learned at an early age helped Lee build a chemical giant that has endured for nearly half a century and now ranks as the country’s oldest company in the industry.

Today, Lee’s sons and grandsons embody the OCI founder’s spirit, which in turn reflects his Kaesong roots.

Last year was particularly important for the chemical firm, as it celebrated its 50th anniversary. To mark the milestone and reflect its transformation into a company focused more on high-tech green energy, the company officially changed its name to OCI from DC Chemical (which it had adopted in 2001).

According to the company, OCI is an acronym for the company’s original name - Oriental Chemical Industries - and is also meant to stand for Origin of Chemical Innovation.

The company said it needed to shift away from its past image as a relatively stodgy business and that its English name did not fully represent its new business areas.

“We are setting OCI up to be a global company,” Lee Soo-young, chairman of the conglomerate, said during a ceremony last year to announce the name change. “In a market that is dramatically changing, we will look to maintain our assertiveness.”

Baik Woo-sug, the president of OCI, echoed those thoughts at the ceremony.

“In changing our name we will prepare for the next 50 years by pushing continuous change and innovation based on what we have achieved in the first 50 years,” Baik said.

OCI was the first company in Korea to establish a soda ash factory and helped boost the alkali industry here. Soda ash is the basic foundation applied in various products ranging from glass and soap to paper and paint.

Today, OCI is a leader in its industry, specializing in inorganic chemistry, petrochemical products and other areas.

In 2008 it embarked on a major effort to reinvent itself into a business specializing in renewable energy, putting a primary focus on producing polysilicon, which is used to develop solar cells and semiconductor wafers.

Analysts see this as a promising new market for the company.

“OCI performed well in the first quarter of the year, but in the second quarter it will do even better, particularly because its polysilicon production rate has been improving while the price of polysilicon is also on the rise,” said Kim Jae-jong, an analyst with Woori Investment Securities.

Polysilicon prices in general have plummeted since 2008 due to over-production, hitting a low of $52 per kilogram in March of this year compared with $400 two years earlier. Early this month, however, the price edged up to $53 per kilogram and is expected to continue to rise.

Kim said OCI has successfully switched its image from a leading chemical company to a business focused on green energy.

“The company will likely continue to expand its polysilicon business, and the contribution this product line is making to the company is currently growing,” Kim said.

OCI has 18 subsidiaries, four of which are listed on the Kospi and another two on the Kosdaq. In the first three months of 2010, the company’s net profit shot up 133 percent from a year earlier to hit 105.5 billion won ($84.7 million). Sales rose 41.6 percent to 611.4 billion won, while operating profit surged 62.5 percent to 146.3 billion won.

The company’s ability to position itself as one of Korea’s top conglomerates is due in part to its tight-knit management team.

Current OCI chairman Lee, who was also recently chairman of the Korea Employers Federation business group, is the eldest son of the founder. His two younger brothers - Lee Bok-young and Lee Wha-young - run major OCI affiliates Samkwang Glass, a nonmetal mineral developer, and Unid, a chemical product manufacturer, respectively.

Lee Soo-young’s cousin Lee Geun-young is the chairman of another leading affiliate called Union, which also specializes in nonmetal minerals, while his sons Lee Woo-hyun and Lee Woo-jeong are deeply involved in the business as well. The older son, Lee Woo-hyun, is currently the vice president of OCI and the younger is president of Nexolon, an affiliate specializing in materials related to renewable energy. Before joining his father in 2005, Lee Woo-hyun worked in other fields such as finance and banking, where he developed an expertise in mergers and acquisitions as well as investing in the manufacturing industry. His younger brother was head of another affiliate, OCI Bullsone, before taking the top spot at Nexolon in 2008.

OCI Vice Chairman Shin Hyun-woo graduated from the same high school as chairman Lee and is a specialist in the industry, as he headed a chemical research lab between 1970 and 1986. Another OCI vice chairman, Kim Sang-ryul, worked in the government and was once the vice chairman of the Korea Chamber of Commerce and Industry. He graduated from the same college as chairman Lee.

Chung Soon-chun, president of Sodiff Advance Materials, is a graduate of the same high school the chairman attended, while OCI president Baik graduated from the same high school as the chairman’s cousin, Lee Geun-young.

Aside from these strong connections, OCI’s management team is at the top of its game, said analyst Kim.

“OCI has been able to succeed because of its strong ties among top management and the owning families,” Kim said. “They are quick and effective in making decisions.”