Icons of industry banking on a shift to materials
Since its establishment in 1987, the institute has been a key contributor to Samsung’s semiconductor and smartphone success.
After the move, expected to be completed by June, “many researchers at the institute will be working on material research with other employees from Samsung affiliates,” said a company official.
About 3,000 researchers handpicked from Samsung Electronics, Samsung SDI, Cheil Industries, Samsung Fine Chemicals and other affiliates have been assigned to the research complex since it opened in November.
The change is part of Samsung’s goal to step up its materials development business, on which the conglomerate is betting its future.
The aim is to create a global materials company in the mold of DuPont in the United States or Japan’s Toray Group. Barriers to breaking into the materials business are many, but once a company develops a primary technology it could dominate the field for years.
“Once your material competitiveness goes up, your competitiveness on other parts [applied in products] goes up as well,” said a Samsung official.
Samsung has been reshuffling its business structure to focus on materials development.
Cheil Industries, the founding company of Samsung Group, was one of the earliest affiliates to make such bold changes. The company in December sold off its fashion business, which has been its core operation for years, to fellow affiliate Everland, an entertainment and amusement park company.
In doing so, it announced its primary business will be developing materials for smartphones and other gadgets of the future.
The move by Samsung Display to become the largest stakeholder in Corning also was part of the group’s plan to strengthen its business in materials used in glass panels. Last June, Samsung Petrochemical created a joint venture with Germany’s SGL and jumped into carbon fiber and composite materials.
The reason behind Samsung’s growing interest in materials development is the limited growth prospects for its computer chip, TV and smartphone businesses.
According to the Ministry of Trade, Industry and Energy, Korea’s materials trade with Japan has seen a more than $20 billion deficit annually. Meanwhile, Chinese companies such as Huawei, Lenovo and ZTE with rapidly growing technology are challenging Samsung in the world’s biggest consumer market.
This is why Samsung Electronics, although reporting quarterly operating profit of more than 10 trillion won ($9.4 billion) has announced a state of emergency.
“By finished products we are world’s best,” said a Samsung official. “However, when it comes to materials, we have to rely on Japanese and other foreign companies. If this continues, we won’t be able to come on top of China in the long run. This is why we are putting all our efforts into investing in materials.”
LG is more desperate than Samsung in trying to reinvent itself. The company that once competed neck and neck with Samsung has been pushed aside in the global smartphone market in just two to three years.
LG is also betting its survival on the materials and parts development business. In particular, its flagship LG Electronics is going for broke on developing materials and parts for electric vehicles and smart cars.
The company in July established LG Electronics’ Incheon campus, which will be the strategic base for researching and developing automotive parts.
Visiting the Consumer Electronics Show (CES) in Las Vegas last month, LG Electronics Vice Chairman Koo Bon-joon emphasized the importance of focusing on developing high-tech automotive parts.
“To meet the rapidly developing smart cars, we need to be thoroughly prepared,” he said.
LG Chem recently reorganized its business structure to center on development of new high-tech materials such as three-dimensional polarizer films used in LCDs and other products, and superabsorbent polymers.
LG Chem was one of the first companies in Korea to develop batteries for electric cars.
The year, LG will build a science park in Gangseo, southwestern Seoul, where key research personnel will concentrate on developing new fundamental technologies.
The conglomerate plans to invest more than 3 trillion won until 2020, while assigning more than 20,000 research and development employees from 12 affiliates to the science center.
Hyundai Motor is another Korean company is feeling the need to develop materials.
In competing globally, the key competitive advantage comes in reducing the overall weight of a vehicle to increase fuel economy. At the same time, the steel on the vehicle has to be durable and strong.
Hyundai Motor has been focusing on developing such strong steel materials through its affiliate Hyundai Steel. The Korean automaker is the only automotive manufacturer among the top five global automotive companies to own its own steel company.
During a visit to the steel mill in November, Hyundai Motor Chairman Chung Mong-koo again stressed that the quality of the steel sheet is what defines the competitiveness of a vehicle.
Hyundai Motor and LG also have joined hands to develop next-generation automobile.
On Thursday, the companies held a Techshow at Hyundai Motor’s research center in Namyang, Gyeonggi, where next-generation automotive parts were exhibited by six affiliates of LG Group, including LG Chem, LG Electronics and LG Display.
Although Hyundai Motor has held numerous Techshows with automotive parts suppliers, this was the first time it has held it with another conglomerate. It also was LG’s first Techshow with Hyundai Motor in which major affiliates participated.
There have been several developments that resulted from Hyundai Motor and LG cooperation, including a wireless internet service in 2004 and LG Chem’s battery used for Hyundai Motor’s Avante hybrid in 2008.
Hyosung Group also is trying to reposition itself with the development of new materials and seen some success.
In November, Hyosung developed the world’s first polyketone, considered a major breakthrough in new materials that is expected to replace nylon.
Additionally, the company succeeded in producing a carbon fiber that is 10 times stronger than steel. Last May, it constructed a plant in Jeonju, North Jeolla, and started commercial production. Carbon fibers are lightweight, yet highly heat resistant, and have applications in such fields as aerospace, cars, defense products and even sports.
The Korea Institute for Industrial Economics and Trade estimates that by 2025 the market for carbon fiber will be 1,000 trillion won, roughly equal to that of the automobile market.
“The barriers to entering the parts and materials market is very high as it takes a lot of time and huge investments to secure the source technology,” said Oh Young-seok, a researcher at Korea Institute for Industrial Economics and Trade.
“It’s about time Korean companies start making changes to their long-term strategy.”
BY Choi joon-ho, LEE HO-JEONG [firstname.lastname@example.org]
More in Industry
Popeyes to close all branches in Korea this month
Contract signed for Covid-19 vaccine
Teas the season
Empty Chairs at Empty Table
Is China's post-Thaad ban on Korean games finally over?