SK chief toasts 25 years, backs battery, pharma and chip

Industry

Published: 31 Aug. 2023, 19:12 Updated: 01 Sep. 2023, 08:40

SK chief toasts 25 years, backs battery, pharma and chip

SK Group Chairman Chey Tae-won speaks during the 2023 SK Group Extended Management Meeting in June. [SK GROUP]

SK Group Chairman Chey Tae-won, who reaches the 25th anniversary of his inauguration on Friday, has provided fresh growth momentum by penetrating into areas like semiconductor, bio and battery, essential parts of the global economy but lesser known areas within the group.

Twenty-five years into his leadership, SK Group now ranks second on the list of Korean conglomerates, trailing only Samsung, compared to fifth when Chey took the chairman post. Its asset size grew by 10-fold going from 33 trillion won ($24.9 billion) to 327 trillion won during the cited period.

Chey took the helm in 1998, when Korea's economy was at its lowest. He was just 38 at the time as his father and former chairman Chey Jong-hyon died relatively young due to lung cancer. Chey was the third captain of the group.

Big companies in Korea were shutting down and broken into pieces to be sold off in the face of the financial crisis, but Chey was determined to endure the headwinds and catapult SK Group, formerly Sunkyong Group, to become a global company.

Since 2021, Chey has also been serving as the chairman of the Korean Chamber of Commerce and Industry, contributing to the growth of the national economy and local businesses.

SK History

From Sunkyong to SK

SK Group's former chairman Chey Jong-hyon, center, and a father of Chey Tae-won attends Federation of Korean Industries meeting in 1997 with a respirator after having a lung cancer surgery. [SK GROUP]

SK Group was founded in 1953 in the aftermath of the Korean War as a textile company, Sunkyong Textile, under Chey Tae-won's uncle Chey Jong-gun.

Chey Jong-hyon, Chey Tae-won's father, was appointed to lead the group in 1973 after his brother and brought about some major milestones to Sunkyong's business.

It acquired Korea Oil Corporation in 1980, marking the start of its petrochemical business. In 1994, it acquired Korea Mobile Telecommunications Service which became today's SK Telecom, the country's top mobile carrier.

Sunkyong's company name changed to SK in 1998.

SK's growth was significant but most of its business was confined to the domestic market.

Chey Tae-won wanted to change that.

“Globalization should be a prerequisite instead of being an option,” Chey had said.

BBC (bio, battery, chip)

SK On and Ford's battery factory under construction in Kentucky [SK ON]

Chey is a firm believer in the power of change in order to survive in an ever changing and competitive industry.

“Companies that don’t change will face not a slow death, but a sudden one,” Chey had said in 2016 to CEOs of the group affiliates, marking the start of Chey's "deep change" initiative which echoes throughout the SK affiliates until now.

“We have to handle the situation as if we would change everything in order to not pay a harsh price."

Chey picked battery, bio and chip, dubbed as “BBC”, as the group's next growth engines.

In 2012, SK Group acquired chip company Hynix under Chey's orders against much opposition due to the not-so-stable chip industry at the time.

Chey, however, thought otherwise. He thought Hynix, which relies on 95 percent of its revenue from exports, could spearhead SK Group's global expansion initiative.

Battery was another area Chey had his eye on. SK's presence in the battery industry picked up pace recently, but the company has been delving into the secondary battery segment since 1996.

"[SK's] battery business will dash forward until all vehicles run on SK batteries," Chey had said in 2011.

On the back of such history, SK On, a recently spun-off battery subsidiary of SK Group, is making aggressive investments in battery factories for electric vehicles. It constructed two battery factories in Georgia, United States and formed a 13-trillion-won joint venture called BlueOval SK with American truck maker Ford last July.

In the bio sector, SK Group acquired 100 percent of U.S. contract manufacturing pharmaceutical company Ampac and established SK pharmteco which now has become the world's No. 5 CDMO (contract development and manufacturing organization) in chemically synthesized pharmaceutical segment.

Coming to fruition

SK hynix's HMB3E advanced memory chip began testing with Nvidia in August. [SK HYNIX]

Chey's enthusiasm in the semiconductor business has been persistent.

"Success in the chip business goes beyond just securing a new growth engine for SK Group, but is directly related to raising competitiveness of the country and increasing its wealth," Chey had said in 2012 when making investments in Hynix.

As if he had expected the ongoing AI boom, SK hynix began developing an advanced type of memory chip known as HBM (high-bandwidth memory) at least since the early 2010s.

HBMs has now become a quintessential part of AI processors.

SK hynix is known to be the sole mass supplier of HBM chips to Nvidia which controls at least 90 percent of the entire AI chip market.

"SK's determination to develop HBM has been strong since the 2010s," said one industry insider who has close affinity with SK hynix. "It has been considered the group's 'next growth engine' as early as that time when the industry had not yet realized the potential of the HBMs.

SK hynix now commands more than 50 percent of the global HBM market, according to TrendForce data, outperforming its strong and sometimes impenetrable rival Samsung Electronics.

Chey's aspiration for building a chip empire is noticeable in the bold M&A deals he has struck.

After acquiring Hynix in 2012 at 3.4 trillion won, Chey made another 4 trillion won stake investment in Japanese memory chipmaker Kioxia, followed by the whopping 10.3 trillion won acquisition of Intel's NAND memory chip business in 2020.

Going global

SK Group Chairman Chey Tae-won talks about meeting with U.S. President Joe Biden last year at the Trans-Pacific Dialogue forum. [YONHAP]

SK Group's rise to join the ranks of global companies was evident last year when he visited the White House to have a meeting with the U.S. President Joe Biden where he announced a hefty $22 billion investment in the country in the sectors of semiconductors, electric vehicles, batteries, green and bio.

"Thank you, Tony [Chey's English name]," Biden had said, referring to the investment as a "big deal."

It was a fresh investment separate from the already committed $30 billion to the country.

That was poised to make SK Group responsible for some 20,000 employments in the United States.

SK Group's export figure grew exponentially as well during the past 25 years, going from 8.3 trillion won in 1998 to 83.4 trillion won in 2022.

That translates to 10 percent of Korea’s entire export figure for last year which was 887 trillion won, according to the Industry Ministry.

The number of its global operations went from 30 to 512 during the cited period.

SK Group’s asset size also grew.

Its asset size which used to come at 32.8 trillion won in 1998 is now 327.3 trillion won, growing 10-fold, according to statistics released by the Fair Trade Commission.

The group's revenue, which posted 32.4 trillion won in 1998, now hovers over 224 trillion won. Operating profit also went from 2 trillion won to 18.8 trillion won between 1998 and 2022.

The proportion of exports from revenue grew from 22 percent to 37 percent.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]