Cheil is into electronics, chemicals, fashion

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Cheil is into electronics, chemicals, fashion

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A researcher at the electronic materials lab at Cheil Industries is checking the test paper. The company currently runs three operating division including chemical, electronic materials and fashion. The electronic division produces liquid material for OLED products, far right, semiconductor parts, second from the right. The chemicals division makes interior parts of vehicles, third from the right, and the fashion division recently launched a new fast fashion label, 8seconds, far left. Provided by the company


At its shareholders’ meeting on March 16, Cheil Industries announced a new CEO, Park Jong-woo, who previously led the Digital Media Division at Samsung Electronics and Samsung Electro-Mechanics. That announcement was a surprise from a company known as a creative fashion house, which launched fast fashion brand 8seconds just last month.

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Why would a 5.5 trillion won ($4.9 billion) company whose name in Korean includes the word mojik, woolen fabric, choose an engineer as its boss? Cheil sees its future in the businesses it diversified into in the late 1980s and early 1990s: chemicals and electronic materials.

The chemicals division, started in 1989, and electronic materials, started in 1994, now account for over 70 percent of the companies’ sales. The electronic materials division, which makes components of semiconductors and displays, has seen sales rise from 8.4 billion won in 1996 to 1.54 trillion ($1.36 billion) won last year. The division accounted for 27.7 percent of total revenues last year.

“Because the IT industry has been growing in recent years, there have been constant demands for the supply of materials used in manufacturing electronic devices,” said analyst Choi Ji-wan of NH Research Center.

With the rise of mobile devices and the evolution of televisions, Cheil is shifting its focus from providing electronic components for semiconductor to displays, investing 20 billion won this year for manufacturing of products used in displays.

The company will invest 10.8 billion won to develop parts for the next generation of displays using organic light-emitting diodes, known by the acronym OLED.

It also plans to invest 9.1 billion won on producing insulator film for OLED displays.

The OLED parts project is currently being tested. Once components are manufactured, they will all go to Samsung Mobile Display, the manufacturer of the displays.

“They make electronic or plastic parts that are crucial in producing the major finished products by Samsung Electronics and other Samsung-affiliated companies, in home appliances and IT products,” said analyst Choi.

In January, Vice President Lee Seo-hyun of Cheil Industries, who is the second oldest daughter of Samsung Electronics Chairman Lee Kun-hee, visited the International Consumer Electronics Show, the world’s largest consumer technology tradeshow, in Las Vegas. She paid most interest to the OLED TVs there.

The chemical division has almost doubled sales from 1.3 trillion won in 2004 to 2.4 trillion won last year.

The chemicals division specializes in engineering plastic such as polycarbonates, used in the interior of vehicles, including the door knobs and window controllers. It provides supplies to General Motors and Renault-Samsung and other local carmakers.

This year, the division is planning to supply materials tailored for each customer to expand its business. A newly completed factory in Hungary will help in European markets.

The division has one more overseas factory in Tianjin, China, which was built in 2010, and a local plant in Yeosu, South Jeolla, finished in 1989.

The fashion division got a boost when Lee Seo-hyun joined the executive team in 2009. Lee had been working with Cheil since 2002 and has a degree from Parsons The New School for Design in New York. The division acquired the Korean retail license for brands like Tory Burch, Theory and 10 Corso Como, and also created a local label, Bean Pole.

“With the arrival of a president from a chemical and electronics background, each division of the company will be led by an expert team, which will result in maximizing sales and profit,” said Lee Tae-hun, director of the Cheil Industries Communications team.

The company, founded as a textile maker in 1954, has had a slow evolution. Nonetheless, its focus on basic textiles has shrunk drastically and ceded to the fashion division, which had sales of 1.6 trillion won last year, up 42 percent from 2008.

“It carries too much risk for a large conglomerate to continue with the textile business, because the initial cost is too high,” said analyst Choi. “Also, the fact that there are not too many successful local fashion labels being launched by Cheil Industries except Bean Pole made it harder for the company to outsource the business, because there’s no brand power the company could work with.”

Choi said the transition to synthetic plastic manufacturing was not too difficult for Cheil due to its experience with synthetic fibers.

“Many companies come and go, but Cheil Industries has managed to survive and flourish for the past 58 years,” said Lee.

“If the company had not adopted some new business models in the past, it might have become forgotten a long time ago.”

The company even tried to alter its official Korean name to include all three business departments, but that was a tall task and it never found one that felt right. It was tough to think of a catchy but meaningful name. And there’s no urgent need to change the name since it uses Cheil Chemical or Samsung Chemical when working with overseas companies.

“We simply did not find any good option,” said director Lee of the communications team. “



By Lee Sun-min [summerlee@joongang.co.kr]

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