Business boundaries blur amid next-generation technology boom
By Yi Whan-woo
Despite the size of their sprawling business empires, Korean conglomerates, known as “chaebols” in Korean, have had distinct business boundaries.
For instance, Samsung is noted for its semiconductor and smartphone businesses, Hyundai Motor for cars, SK for oil refining and telecommunication, Lotte for shopping and POSCO for steel.
But such boundaries are blurring fast, as the conglomerates are crossing over into each other's territories to harness next-generation technologies, many of which are associated with low-carbon and eco-friendly business practices.
“It can be said that the chaebols face an innovative phase where their flagship businesses will evolve or will change into something completely new in accordance with industrial trends,” said Lee Jae-gon, a professor at Myongji University's Department of Distribution Industry Management.
Among the promising industries are electronic vehicle (EV) batteries and related materials, hydrogen energy and unmanned air mobility (UAM).
The conglomerates appear to have their own approaches to dominating their targeted industries.
Some already have embarked on such missions and seek to consolidate market leadership through expanded investments, as seen from the case of LG which entered the battery business in the 1990s.
Others are trying to capitalize on the know-how of their affiliates to enter new and lucrative industries. Such attempts can be seen with POSCO using its steel manufacturing expertise to produce cathodes and anodes for EV batteries, as well as hydrogen.
The third group of conglomerates does not mind starting from scratch as late comers, as seen with GS which is reportedly thinking about starting an EV battery materials business. The conglomerate is believed to have had its oil refining arm GS Caltex form a partnership with Cosmo Advanced Materials, a mid-sized battery materials manufacturer.
For battery, LG and SK are expanding their presence in the United States. During a summit between leaders of Korea and the U.S. in May, their respective affiliates ― LG Energy Solution and SK Innovation ― vowed to spend a combined $14 billion to build EV battery production plants of their own and also in the form of joint ventures with U.S. firms.
The EV battery-related business of POSCO is represented through “Autopos,” a brand launched in January for its products and business systems related to EVs and other eco-friendly cars.
The conglomerate plans to produce 220,000 tons of lithium and 100,000 tons of nickel by 2030. This will make it possible for the firm to manufacture 260,000 tons of cathode materials and 400,000 tons of anode materials each year.
Lotte Chairman Shin Dong-bin announced plans in May to have affiliate Lotte Chemical be equipped with facilities exclusively for the production of EV battery materials.
The chemical arm of Lotte has been importing organic solvents that are needed for EV battery manufacturing.
And Shin's remark was interpreted as an expression of willingness to become self-reliant in solvent production and accordingly expand Lotte's presence in the EV battery materials market.
GS Caltex and Cosmo Advanced Materials are expected to create synergy through possible partnerships in the form of a joint venture or equity investment, among others.
“It seems GS has been inspired by other conglomerates to enter the EV battery materials business,” an industry source said, adding, “The group will need to think fast and take action accordingly to catch up.”
Hyundai Motor, SK and POSCO are among the firms racing for dominance in the hydrogen energy industry.
Hyundai Motor is dedicated to its fuel cell system, called HTWO, which stands for the hydrogen molecule H2, to target Korea, the U.S., Europe, China and other global markets.
On June 3, SK invested in Monolith, a U.S. company specializing in the manufacture of affordable, hydrogen.
The investment will be a part of SK's plan to create a value chain of production, distribution and sales of hydrogen.
The group's affiliate, SK E&S, is Korea's biggest importer of LNG, including CH4 ― a major raw material containing hydrogen.
Also, hydrogen is generated as a byproduct at SK Incheon Petrochem, while SK Energy's gas station networks could be used to offer green energy.
The latest step taken by POSCO on hydrogen energy was the groundbreaking for a plant in Gwangyang, South Jeolla Province in May to carry out lithium hydroxide extraction.
The 1,960-square-meter plant will be able to produce 43,000 tons of lithium hydroxide annually once construction is finished by the end of 2023, enough to make batteries for around 1 million EVs.
Hyundai Motor, Hanwha and Hanjin are interested in Urban Air Mobility (UAM), a futuristic mode of transportation.
UAM services are designed to travel 30 to 50 kilometers in urban areas, offering flying transportation services in connection with buses, the subway and other ground transportation modes.
The country is seeking to commercialize services in the domestic market in 2025 to better tackle traffic congestion in major cities.
Hyundai Motor Chairman Chung Euisun wants to shift from a car-oriented business model and make UAM accountable for 30 percent of the conglomerate's business portfolio while lowering its dependency on car manufacturing to 50 percent.
Related projects include the launch of a UAM business division in September 2019, a partnership with British mobility firm Urban-Air Port in August 2020 and planned launch of unmanned cargo aircraft by 2026.
Hanwha Group's UAM business is led by Hanwha Systems, its defense and information technology arm.
In January, Hanwha Systems acquired a 30 percent stake in U.S. air taxi startup Overair. The two are jointly developing a personal air vehicle, titled Butterfly.
The Hanwha affiliate also plans to launch “verti-hub,” a city terminal for the takeoff and landing of air taxis, at Gimpo International Airport in western Seoul, in cooperation with Korea Airports Corp.
Hanjin Group's flagship affiliate Korean Air launched an internal taskforce in May, with aerospace experts in charge of developing drones and unmanned aircraft, and training aviation control employees.