SK Group to invest almost $60 billion in AI by 2028, plans further restructure

Industry

Published: 30 Jun. 2024, 17:56 Updated: 01 Jul. 2024, 17:07

SK Group to invest almost $60 billion in AI by 2028, plans further restructure

Top heads of SK affiliates listen to SK Group Chairman Chey Tae-won during a two-day meeting the company held on Friday and Saturday to review its business structure and investment portfoilo. [SK]

SK Group will invest 82 trillion won ($59.4 billion) in the AI sector by 2028 and streamline its business structure by divesting from nonessential affiliates and assets.

The announcement came as the result of the two-day meeting the conglomerate held between Friday and Saturday at the SKMS Center in Icheon, Gyeonggi. The meeting was attended by SK Group Chairman Chey Tae-won and 20 CEOs from major affiliates.

SK, the country’s second-largest conglomerate, publicly mentioned that it is pursuing “rebalancing” its investment portfolio, which will lead to the unloading of certain assets.

“We need proactive and fundamental changes to prepare for a ‘new transition era,’” Chey said at the meeting, which he attended via video call due to his business trip in the United States. “In the U.S., changes related to AI are so significant that there is basically no other topic of interest right now. We need to leverage the company’s capabilities to enhance AI services and infrastructure, to ultimately strengthen ‘AI value chain leadership.’”

Chey also projects that SK’s energy sector will possess substantial growth opportunities akin to AI globally.

To meet Chey’s goals, SK plans to invest 103 trillion won over the next five years and allocate 80 percent of the investment to AI related businesses.

To realize Chey’s ambition, the company targets procuring 80 trillion won in funding by 2026 to invest in AI and semiconductors through profitability improvements and business structure optimization, although specific strategies were not outlined.

Investments in AI and semiconductors will focus on high-bandwidth memory (HBM), AI data centers and AI services, such as advancement in personal AI assistants.

The company also said that SK Telecom and SK Broadband will invest 3.4 trillion won in AI data centers over the next five years.

In line with its efforts to push investment in the AI and chip businesses, SK will establish a committee dedicated to semiconductors from Monday to enhance synergy among affiliates related to the sectors. The committee will be placed under SK Supex Council, the conglomerate’s top decision-making body. The company has appointed SK hynix CEO Kwak Noh-jung to head the group.

Through management improvements, SK aims to generate 30 trillion won in free cash flow within three years to maintain a debt ratio below 100 percent.

SK anticipates turning a pre-tax profit of 22 trillion won this year, following a 10 trillion won loss in 2023. By 2026, the company targets achieving 40 trillion won in pre-tax profit.

Chey also urged CEOs to pursue “qualitative growth” in the green, chemical and bio sectors.

The company said that it will be taking steps to adjust the number of its affiliates to “a manageable range.”

“We have a clear goal of achieving ‘qualitative growth,’ and there is nothing we cannot accomplish with consistent effort,” stated Chey Chang-won, chairman of the SK Supex Council. “We must accelerate the operational improvements that each company is going through to meet market expectations and earn trust.”

The group has begun to pursue restructuring, such as SK Networks’ sale of its car rental affiliate to Hong Kong-based Affinity Equity Partners for 820 billion won.

Talks over a merger of energy affiliates and sales of subsidiaries like SK IE Technology, siltron and Nexilis are underway, according to multiple sources.

SK Innovation also said on June 20 via an electronic disclosure that it is considering merging with SK E&S.

SK has 219 affiliates as of this year, boasting the highest number of subsidiaries in Korea, according to the Fair Trade Commission (FTC). The figure far outnumbers other domestic firms, such as Samsung at 63, Hyundai at around 70 and LG at 60.

Correction, July 1: An earlier version of this story misstated the size of the investment as $600 billion.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]