Reinventing business model
SK chairman to maximize synergy among affiliates
By Kim Yoo-chul
SK Group Chairman Chey Tae-won is stepping up efforts to reinvent the group by redesigning its business portfolio and creating synergy among affiliates under new business line-up.
The group’s recent takeover of Hynix Semiconductor, now SK hynix, was the first step for the chairman to transform the telecom-oriented group into one with a more balanced portfolio. He is now placing a top priority on finding core competencies of key businesses and combining them to create synergy.
The chairman sees SK Telecom, SK Planet and SK hynix as key drivers for the group’s future growth. Telecom, logistics, oil, construction and mobile content are the group’s existing key businesses.
Chey is the co-CEO of the world’s second-biggest chip supplier with Kwon Oh-chul, who was past of Hynix CEO.
The acquisition is the chairman’s initiative to move away from the group’s heavy dependence on the local market. SK has so far failed to yield high returns from businesses outside the Korean peninsula.
SK Telecom, the group’s most critical cash generator is being asked to diversify its business portfolio amid the saturating local telecom market.
``This is the greatest achievement. I mean the group acquired Hynix Semiconductor, successfully. With SK hynix, the group is going to see business expansion,’’ Chey said in a message to employees.
As SK Telecom is the nation’s top mobile carrier, running a chip-making business will strengthen investor confidence for both SK Telecom and SK hynix stocks, market analysts said.
``SK Telecom will use chips provided by SK hynix with competitive pricing. Because it is capable of producing advanced chips for use in SK’s various mobile solutions, chances are high that SK Telecom will grow its new businesses,’’ said a high-ranking SK executive.
SK’s global awareness is expected to increase because SK hynix’s chip-making plant in Wuxi, Jiangsu Province, is widely-regarded as the ``most successful business model’’ as a foreign company.
The plant emerged as the ``must-visit’’ spot for China’s top politicians thanks to SK hynix's steady and healthy contribution for the sagging job market, there. As of the end of March, some 3,500 Chinese were working for the plant.
China’s top legislator Wu Bangguo, Chinese Prime Minister Wen Jiabao and Chinese Vice President Xi Jinping have already made rare visits to the factory. The Wuxi plant received heavy financial and administrative support from Beijing.
SK hynix plans to expand its chip business in China and the construction of its first NAND flash memory plant nearby the existing facility is one possible option, though Son Kyung-bae, an SK hynix spokesman, declined to comment.
The firm suffered an operating loss during the first quarter of this year, however, market analysts believe its bottom line will strengthen in the second quarter and even throughout this year as SK hynix is receiving more chip orders from its major clients including Apple and Hewlett-Packard (HP) of the United States.
``SK Group could invest money that’s been earned from its chip-making business to new ventures. That’s also part of the synergy that SK Group is hoping for,’’ said Park Young-joo, an analyst at Woori Investment, a leading local brokerage.
SK Planet, a wholly-owned affiliate of SK Telecom, established on Oct. 1, last year, with the aspiration to become a global platform innovator, is also the SK chairman’s top concern as mobile content is the top phrase for the technology industry amid the explosive growth of content-intensive digital devices such as tablets and smartphones.
``Apple didn’t exist before Apple and there was no Google before Google. What I mean is SK Planet needs to change with a new business concept,’’ said Chey in a message to employees.
In line with the chairman’s other initiative, SK Planet formed an alliance with supplier of content protection software and security semiconductors IP Elliptic Technologies to enable security for high-definition (HD) video streaming on connected devices such as smartphones, tablets and connected TVs.
Elliptic and SK Planet have collaborated to move HD streaming media technology forward on fully featured long-term evolution (LTE) Android handsets from a manufacturer. SK Planet is using the ARM’s ``TrustZone’’ technology on security platforms that target Web-connected devices.
``The groundwork is under way. SK Group is ready to take off with a new business momentum,’’ said an official from SK Telecom.