Hanwha M&S launch tests Kim Dong-seon's leadership

Hanwha M&S President Kim Dong-seon, center, poses with executives and board members during an event celebrating the holding company's launch at The Plaza Seoul hotel, Aug. 3. Courtesy of Hanwha M&S

With the launch of Hanwha Machinery and Service Holdings (M&S) on Aug. 3, Kim Dong-seon, its president and head of future strategy, has begun overseeing the newly established holding company, which comprises seven key subsidiaries and 57 companies in total.

While the three sons of Chairman Kim Seung-youn have each taken on roles in different sectors within the group, the youngest faces a leadership test with the rather unusual combination of businesses — technology and life solutions.

Previously, Kim Dong-seon was vice president at Hanwha Galleria, Hanwha Hotels & Resorts, Ourhome and Hanwha Vision, overseeing businesses spanning retail, food, hotels and robotics. He now also oversees the group’s tech businesses, including semiconductor manufacturing equipment, logistics automation systems and artificial intelligence (AI)-based visual analysis and solutions.

Four subsidiaries under Hanwha M&S specialize in technology and equipment: Hanwha Vision, Hanwha Semitech, Hanwha Momentum and Hanwha Robotics. This has raised questions about how Kim will manage these tech firms alongside Galleria, Hotels & Resorts and Ourhome, which make up the group’s life solutions sector.

There is also concern over the feasibility of Hanwha M&S’ goal of increasing annual consolidated sales to 14 trillion won ($9.9 billion) by 2030. With the combined sales of the seven subsidiaries totaling about 6 trillion won at the end of last year, Kim’s leadership will increasingly be judged by whether he can deliver on this ambitious growth target.

Despite the uncertainty, Hanwha says the restructuring and launch of Hanwha M&S will create new opportunities for its life solutions and tech units, saying the main reason for bringing the two sectors together is to create synergy.

“Ourhome, for example, will start implementing more robots from Hanwha Robotics. That will not only ensure consistent quality across Ourhome’s food service operations but also significantly reduce costs. That’s the synergy right there,” said Yoon Moon-yup, a deputy general manager at Hanwha's communications committee.

A Hanwha Robotics robot cooks instant noodles, March 16. Courtesy of Hanwha Galleria

A communications official from Hanwha Galleria, which operates the luxury Galleria Department Stores nationwide, as well as food and beverage (F&B) brands including ice cream brand Benson, said the group’s life solutions and tech units have so far been overshadowed by its more prominent defense and shipbuilding operations. He said the recent group restructuring is intended to address that imbalance.

“Despite their great potential, life solutions and tech have been less prioritized, receiving fewer investments from the group and taking longer to make decisions. Now that they are separated from the group’s flagship businesses, we expect such shortcomings will be overcome and they will rise from second-tier to top-tier subsidiaries,” the official said.

He said that before pursuing synergy, each Hanwha M&S subsidiary will first focus on growing its business. Hanwha M&S said it plans to invest 4.7 trillion won in facilities and research for its subsidiaries through 2030.

“Each Hanwha M&S subsidiary will expand its business through top-down investment aimed at strengthening its position within the group. Along the way, if opportunities arise to create synergy among the companies and further expand their businesses, we will pursue them,” he said.

Other subsidiaries expressed similar expectations for group-wide collaboration. A senior official at Hanwha Vision, an AI-based visual solutions developer, said the company plans to apply its AI video surveillance capabilities at industrial sites as well as life solutions venues such as department stores, hotels and food preparation facilities.

An Ourhome official said cooperation between Hanwha Hotels & Resorts and the group’s technology companies could help the company take the lead in the group’s F&B manufacturing and distribution by introducing smart kitchen and factory automation to its food service and food ingredient supply operations.

Three of the four tech companies under Hanwha M&S reported operating losses last year. Hanwha Semitech and Hanwha Robotics remained in the red, while Hanwha Momentum swung to an operating loss. Hanwha Vision was the only tech subsidiary with a positive balance, posting an operating profit of 162 billion won.

All three companies in the life solutions sector reported operating profits. Ourhome, the largest revenue generator under Hanwha M&S, posted 2.5 trillion won in sales and an operating profit of 80 billion won. Hanwha Hotels & Resorts recorded 2.4 trillion won in sales and an operating profit of 61 billion won, while Hanwha Galleria posted 580 billion won in sales and an operating profit of 9.4 billion won.