SK spurs business realignment in China
By Kim Yoo-chul
SK Group, with business fields ranging from mobile phones to chemicals, is stepping up efforts for corporate realignment in China.
A growing number of SK employees in China have already been tasked to better handle SK’s emerging business-to-business-related (B2B) businesses, sources directly involved with the matter said Thursday.
``Consensus has been reached by top SK’s decision makers to shift key focuses in China as efforts to bolster SK’s presence there have been struggling,’’ said an SK executive, asking not to be identified.
``But that doesn’t necessarily mean that SK Group plans to completely fold the venture. Rather than focusing on business-to-consumer (B2C) segments such as mobile phones, SK will shift its sights to business-to-business (B2B) sectors.’’
SK Group, led by Chairman Chey Tae-won, is also considering realigning ``a certain percent’’ of senior management jobs to B2B-centric business divisions from some money-losing divisions.
``We are desperate to strengthen competitiveness in some of highly-lucrative areas for business sustainability,’’ said the executive without elaborating further.
SK plans to use money from various cost-cutting measures and business realignments to finance the acquisition of Hynix Semiconductor, which is worth about 3 trillion won at the current market value.
Another SK executive declined to comment on how much cash SK could raise through such measures.
SK Telecom, the group’s critical telecommunications affiliate, is strengthening its bid for a controlling 15 percent stake of the world’s No. 2 computer memory chipmaker.
SK Group is in the process of combining three laboratories in China into the one. Group officials said the streamlining plan is aimed at strengthening management efficiency.
``SK doesn’t have a favorable corporate image in China and it’s becoming the target of other large South Korean companies in China as higher paychecks to local workers have burdened them in terms of the flexibility of labor management,’’ said an unnamed SK official on the condition of anonymity.
The situation has become quite desperate for SK Group in China.
Previous attempts by SK Telecom to break into the stiff Chinese market failed after it completely folded its mobile content and mobile telecommunications businesses.
SK Telecom identified the platform business as one of its next revenue drivers. This has been challenging considering SK’s lack of experience in managing mobile platforms.
Still, its telecommunications business is heavily dependent upon the number of phone customers in the fully-saturated South Korean market.
The group’s chemical business led by SK Innovation is destined for a similar fate as Beijing has delayed giving the green light to SK’s proposal to build a naphtha plant in the Chinese regional city of Wuhan.
``We don’t know when we’ll receive the approval from Beijing,’’ said another SK official. SK Innovation has teamed up with oil refiner China Petroleum & Chemical Corp and Sinopec to build the facility with an annual production capacity of 800,000 tons.
Since 2007, SK Group has been trying to persuade China for its approval but negotiations have stalled in what officials say is partly due to its ``unfavorable corporate image.’’
Chey, who ordered the expenditure on the China business, held a strategic meeting with top Chinese government officials to gauge the marketability in infrastructure, urbanization and logistics projects, according to SK officials.
Since 1989, SK Group has spent ``billions of dollars’’ in China, though an SK representative declined to specify the exact amount.
Must get Hynix
Despite previous business setbacks, China is a market SK does not want to lose. It’s sees a second chance to revive falling business momentum by making vigorous efforts to buy Hynix.
Hynix runs a cutting-edge chip-making factory in Wuxi, Jiangsu Province and the semiconductor facilities have been regarded as a successful business model for a foreign company by top Chinese politicians thanks to Hynix’s steady localization efforts.
``Buying Hynix means earning a good corporate image. If SK concludes the deal successfully that could give us huge momentum to significantly lift our China business,’’ said the SK executive.
Hynix produces value-added chips using advanced technologies and the facilities are ``frequently-visited’’ spots for influential Chinese politicians.
``Again, we need a strong brand. We are ready to endure restructuring for external and qualified growth outside Korea.’’
SK Telecom chief executive Ha Sung-min agreed that it’s been stalling over external growth in the last five years and said the acquisition of Hynix is more than necessary.