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- SK hynix's Kwak Noh-jung Eyes Expansion Beyond HBM, Exploring Semiconductor Packaging in the U.S.
- Kwak Noh-jung, President and CEO of SK hynix, will begin construction of a semiconductor packaging plant in Indiana, USA, next month, sparking speculation that the company is looking to enter the advanced post-processing semiconductor market beyond High Bandwidth Memory (HBM).
Some suggest that SK hynix, already strong in HBM packaging, is inevitably entering the semiconductor post-processing packaging business, which is projected to exceed KRW 100 trillion (US$ 72.1 billion) within five years.
On the 20th, SK hynix announced that it will invest KRW 5.9 trillion (US$ 4.26 billion) to build a new advanced packaging plant in Indiana, USA, starting in January next year.
The announcement came a day after the U.S. Department of Commerce confirmed a semiconductor facility investment subsidy of $458 million (approximately KRW 700 billion or US$ 504 million).
The company stated that the investment aims to “strengthen HBM competitiveness and explore opportunities to enter new markets.” The Indiana packaging plant is expected to handle the large-scale HBM packaging demand.
Regarding “exploring opportunities to enter new markets,” some speculate that Kwak is preparing to enter the advanced post-processing semiconductor packaging market.
SK hynix is already known for its strength in HBM packaging. HBM is a memory semiconductor created by stacking multiple DRAM layers, and HBM packaging refers to the technology of integrating the stacked DRAM into a single unit.
SK hynix developed the industry’s first "Advanced MR-MUF" packaging technology to produce higher-performing HBM. This packaging expertise enabled the company to secure NVIDIA’s HBM certification ahead of competitors.
However, beyond HBM packaging, Kwak has been investing for a long time in advanced packaging technologies used in AI chips and other applications.
In 2021, the company highlighted “Fan-Out Wafer Level Package (FO-WLP)” as a future growth engine that would contribute to revenue outside of HBM packaging.
FO-WLP is a packaging method that directly attaches solder balls (input/output terminals) to a chip without an intermediary substrate. This reduces wiring length, decreases package thickness, and enhances performance.
An SK hynix representative stated, “FO-WLP is used for device packaging. Foundry companies are actively developing post-processing technologies to expand the market, and SK hynix is also strengthening infrastructure investments in FO-WLP technology for long-term growth.”
The packaging business required to complete AI chips produced by companies such as NVIDIA is primarily handled by a few foundries, such as TSMC and Samsung Electronics, and by semiconductor post-processing specialists known as OSAT (Outsourced Semiconductor Assembly and Test) firms.
For instance, NVIDIA supplies HBM from SK hynix for AI chip production, while TSMC completes the AI chips by packaging the HBM and GPUs into a single unit.
The semiconductor packaging and post-processing market is projected to grow rapidly alongside the explosive growth of the AI market.
According to market research firm Global Information, the OSAT market is expected to grow from $43.36 billion (approximately KRW 62.86 trillion or US$ 45.4 billion) this year to $71.21 billion (approximately KRW 103.26 trillion or US$ 74.8 billion) by 2029.
However, SK hynix is not expected to compete directly with TSMC in the post-processing packaging sector. TSMC has established itself as a close partner of SK hynix alongside NVIDIA, and the companies are likely to maintain their cooperative relationship.
Additionally, TSMC possesses world-class technology in both foundry and post-processing packaging and is reportedly developing next-generation Fan-Out Panel Level Package (FO-PLP) technology.
Analysts suggest that Kwak is eyeing the post-processing packaging market currently dominated by OSAT companies.
According to market research firm TechSearch, the combined revenue of the top 20 global OSAT companies reached $35.37 billion (approximately KRW 48.76 trillion or US$ 36.6 billion) last year, with Taiwanese companies accounting for 46.2% of the market share. Korea’s share stood at only 4.3%.
An SK hynix representative stated, “It is true that we are preparing technologies such as FO-WLP, but nothing specific has been decided regarding commercialization at this time.”
#KwakNohJung #SKHynix #HBM #AdvancedPackaging #FOWLP #IndianaPlant #SemiconductorPostProcessing #OSATMarket #AITechnology #TSMC
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- Galaxy S25 Faces Record-High Costs: Roh Tae-moon Hit by Soaring Exchange Rates and Chip Price Hikes
- Roh Tae-moon, President and Head of Samsung Electronics' Mobile eXperience (MX) Division, is expected to face challenges securing profitability for the Galaxy S25 series due to a "record-high" increase in production costs.
Roh is considering shifting part of the cost burden to consumers by increasing the launch price of the Galaxy S25. However, given the recent price hikes for certain previous models, concerns are rising about greater consumer resistance.
The memory semiconductor market is also projected to continue its downward price trend in 2025. If the MX Division, which has served as a stabilizing factor during semiconductor downturns, also struggles, analysts suggest that Samsung Electronics may face a “perfect storm.”
According to industry sources on the 20th, Samsung Electronics is expected to hold its "Samsung Galaxy Unpacked" event as early as January 22, 2025, to unveil the Galaxy S25 series. Production costs, however, are anticipated to rise more than ever.
The sharp rise in the won-to-dollar exchange rate, which has approached KRW 1,450 per USD, has increased the costs of importing key components.
In Q3 2024, the cost of raw materials purchased by Samsung Electronics’ Device eXperience (DX) Division amounted to KRW 52.5743 trillion (US$ 37.8 billion), representing a 5.7% increase compared to the same period in 2023. This rise is attributed to the higher exchange rate.
An industry official stated, “The recent rapid rise in the won-to-dollar exchange rate has significantly increased the cost of smartphone components, which are paid for in dollars. Unlike semiconductors, the proportion of components in smartphone production costs is very high, making the exchange rate increase particularly detrimental.”
The production cost of the Galaxy S series is estimated to account for nearly 40% of its launch price.
Another burden is the growing reliance on Qualcomm.
Unlike its predecessor, the Galaxy S25 series is expected to source its mobile processor (AP), the "Snapdragon 8 Elite," entirely from Qualcomm.
Previously, Samsung’s in-house AP, Exynos, played a significant role in reducing production costs and negotiating AP prices with Qualcomm.
However, due to delays in Exynos development this year, it could not be adopted. The Exynos 2400, used in the Galaxy S24, was reportedly over $60 cheaper than the Snapdragon 8 Gen 3.
Moreover, the Snapdragon 8 Elite, slated for the Galaxy S25, is expected to cost 20–30% more than its predecessor, the Snapdragon 8 Gen 3.
Roh Tae-moon has long been regarded as a “master of cost reduction.”
Despite steady increases in smartphone component prices, he maintained an operating profit margin close to double digits through supply chain diversification and resource efficiency.
In fact, the MX Division posted operating profit margins of 11.5% in 2020, 12.5% in 2021, 9.4% in 2022, and 11.6% in 2023.
However, due to rising component prices and intensifying global competition, it is widely predicted that maintaining a 10% operating profit margin in 2024 and 2025 will be challenging.
As a result, Roh is reportedly considering a price increase for the Galaxy S25. Yet, as prices for the Ultra model and the 512GB Standard/Plus models were already slightly increased with the Galaxy S24, there is significant concern about the risks of consecutive price hikes.
Samsung has set a sales target of 14.8 million units for the Galaxy S25 series, raising the goal by approximately 3 million units compared to its predecessor. However, raising prices could lead to a decline in sales volume, posing another challenge.
If the MX Division’s profitability worsens, it could significantly impact Samsung Electronics’ overall performance.
The semiconductor-focused DS Division is also facing difficulties in achieving expected profitability due to falling memory prices.
Major domestic securities firms have begun to revise Samsung Electronics’ 2025 operating profit projections downward.
Kim Kwang-jin, a researcher at Hanwha Investment & Securities, stated, “2025 will be a challenging year for both the DS Division, which has the highest profit contribution, and the MX Division. The MX Division must address potential profitability pressures stemming from weak front-end demand and rising component costs.”
#RohTaeMoon #SamsungElectronics #GalaxyS25 #smartphonecosts #MXDivision #Qualcomm #Snapdragon8Elite #Exynos #operatingprofit #semiconductorindustry
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- NCSoft's First Foray into China’s Mobile MMORPG Market: Can Kim Taek-jin Restore Lost Pride?
- Kim Taek-jin, co-CEO of NCSoft, is making his first attempt to enter the Chinese mobile game market with two mobile MMORPG titles.
With the domestic market for mobile MMORPGs, including the company’s flagship Lineage series, reaching saturation, Kim appears determined to seize new growth opportunities in China, the world’s second-largest gaming market.
While most of NCSoft’s revenue has traditionally come from South Korea and Taiwan, the company seems to have concluded that expanding into overseas markets, including China, is essential to resolve its growth stagnation.
According to reports from the gaming industry on the 19th, NCSoft is expected to expand its partnership with Tencent Games, the gaming division of Chinese IT giant Tencent, to compete in the Chinese market.
On the 18th, NCSoft signed an agreement with Tencent Games and Xiaoming Taiji for the Chinese release of its mobile MMORPG Lineage2M. The game received a foreign game license (service permit) from the Chinese government on October 28 this year. Its Chinese service name is Tiantang 2: Mengyue (天堂2: 盟約).
In August, the company conducted a second closed beta test (CBT) for its mobile MMORPG Blade & Soul 2, which is also being serviced locally by Tencent Games. Tencent Games introduced the title as one of its key upcoming releases during its Spark 2024 event in May. Its Chinese service name is Jianling 2 (剑灵 2).
While NCSoft has previously serviced PC MMORPGs such as Lineage and Lineage 2 in the Chinese market, this marks the company’s first full-scale entry into the mobile MMORPG market.
In September, during a visit to South Korea by Tencent Games executives, NCSoft reportedly provided detailed presentations on its upcoming new games, which are scheduled for release next year and beyond.
This raises the possibility of a Chinese release for titles like AION 2, a large-scale MMORPG planned for release in 2025; Project TAC, a real-time strategy (RTS) game; Project LLL, a looter-shooter game; and Project Skyline, an MMORPG based on Sony’s action-adventure IP Horizon.
The decision to pursue this strategy in China seems to reflect the strong will of Kim Taek-jin, NCSoft’s Chief Creative Officer (CCO), who oversees the company’s game development and service operations.
During a media event on March 20, related to the appointment of co-CEO Park Byung-moo, Kim stated, “Recently, the company has been developing games aimed at overseas markets while establishing global partnerships. In addition to the Chinese release of Blade & Soul 2 and our joint development efforts with Sony, we are reviewing opportunities to expand our business with various global players.”
In the third quarter of 2024, NCSoft’s revenue from Asia, including South Korea and Taiwan, accounted for approximately 83.3% of its total revenue. Additionally, mobile MMORPG revenue made up 63.0% of the total.
This figure excludes revenue from other mobile games and PC online games serviced by NCSoft, indicating that the company’s performance is heavily concentrated in mobile MMORPGs within specific regions.
The domestic mobile MMORPG market has become oversaturated, with competition growing increasingly intense and profitability declining.
According to data analytics platform Mobile Index, Lord Nine, a mobile MMORPG launched by Smilegate on July 12, pushed Lineage2M and Lineage W out of the top 10 revenue rankings in August and September, respectively.
Next year, new titles such as Nexon’s Fantasy Tiger Online, Netmarble’s RF Online Next and The Red: Heir of Blood, and Kakao Games’ Project Q and Chrono Odyssey are expected to launch.
Given this competitive landscape and declining usage rates in South Korea, Kim appears to be focusing on China’s mobile game market, which has shown continuous growth for two consecutive years.
According to the 2024 Game User Survey published on November 16 by the Ministry of Culture, Sports, and Tourism and the Korea Creative Content Agency, the game usage rate among 10,000 respondents over the past year was 59.9%, a 3 percentage point decrease from 2023.
Meanwhile, according to the China Game Industry Development Report 2024, published on November 13 by the Chinese Academy of Social Sciences’ Social Sciences Academic Press, China’s gaming market is expected to generate KRW 64.2673 trillion (USD 46.3 billion) in revenue and have 674 million users this year.
This represents a 7.53% increase in revenue and a 0.94% increase in the number of users compared to 2023. Mobile game revenue is estimated to reach KRW 46.9778 trillion (USD 33.9 billion), accounting for 73% of the total market, a 5% increase from last year.
An industry official commented, “NCSoft has achieved explosive growth through mobile MMORPGs in the domestic market, giving the company a strong advantage in this genre. Given its success in markets like Taiwan and other Chinese-speaking regions, there is a high likelihood that it will also succeed in mainland China.”
#NCSOFT #KimTaekjin #TencentGames #Lineage2M #BladeAndSoul2 #ChineseMarket #MobileMMORPG #globalexpansion #gameindustry #AION2 #ProjectLLL #ProjectSkyline
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- Jeong Chul-dong’s Transparent OLED Bet: High Hopes Amid Price Concerns and Chinese Competition
- LG Display is accelerating its full transition to the OLED business, with CEO Jeong Chul-dong placing a major bet on the world’s first commercialization of transparent OLED displays.
LG Display aims to secure dominance in the transparent OLED market, projected to grow to KRW 12 trillion (USD 8.7 billion) by 2030, as it begins selling TVs featuring its transparent OLED panels.
However, concerns remain over the high price of transparent OLED technology and rapid advancements by Chinese competitors.
On the 19th, LG Electronics announced the launch of the world’s first transparent OLED TV. Pre-orders began on the 18th in North America, with plans to gradually roll out the product in Europe and South Korea.
CEO Jeong Chul-dong is advancing LG Display’s OLED-focused strategy, highlighted by the sale of the company’s last large-scale LCD plant to China’s CSOT. This move is seen as an effort to leverage LG’s technological edge to dominate the market.
According to global consulting firm Boston Consulting Group (BCG), the global transparent OLED market is expected to grow from KRW 3 trillion (USD 2.2 billion) in 2025 to KRW 12 trillion (USD 8.7 billion) in 2030, a fourfold increase.
The South Korean government is also increasing support for transparent OLED displays.
In May, the Ministry of Trade, Industry, and Energy designated transparent, extended reality (XR), and automotive displays as three national advanced display products and announced KRW 74 billion (USD 53.4 million) in funding. Additional support measures include pilot projects, tax credits, and regulatory easing.
LG Display is recognized as the leader in transparent OLED technology.
The company showcased its latest transparent OLED display innovations earlier this year at CES 2024, the world’s largest IT and electronics exhibition, and at the Korea Display Industry Exhibition 2024, held in August at COEX in Seoul, attracting significant market attention.
Competitor Samsung Display possesses transparent microLED display technology. At CES 2024 in January, Samsung Display introduced its transparent microLED panels, reportedly priced at over KRW 100 million (USD 72,500).
In comparison, LG Electronics' transparent "Signature OLED T" TV, which uses LG Display’s transparent OLED panel, is priced at approximately USD 60,000 (KRW 87 million).
LG Display is primarily targeting the business-to-business (B2B) market for transparent OLEDs.
According to the company, transparent OLED products can be applied to subway windows, building glass windows, store automatic doors, museums, and real-time automatic translation devices.
In April, LG Display supplied a 55-inch transparent OLED panel for a pilot project on the windows of the GTX-A metropolitan express train in South Korea.
Although CEO Jeong has successfully commercialized transparent OLED displays and is pushing for market dominance, concerns remain. The technology remains expensive, and China is rapidly closing the gap.
An industry insider stated, “The price of transparent OLED displays and TVs is still too high, making it unclear how much demand there will be. However, as time goes on and the market expands, prices are likely to decrease.”
Chinese display manufacturers BOE and Skyworth also unveiled transparent OLED technology in January. While their products were criticized for lower transparency and quality compared to LG Display’s, their possession of the technology was confirmed.
Although a technology gap still exists, China, which overtook Korea in the LCD market, is also rapidly catching up in OLED technology.
In Q1 2024, China surpassed Korea in global OLED market shipment share, holding 50.5% compared to Korea’s 48.2%. However, in Q2, Korea reclaimed the top spot with a slight lead, recording 49.9% compared to China’s 49%.
China possesses both transparent microLED and transparent OLED technologies. Leveraging its LCD expertise, China has already introduced various transparent microLED products for advertising and exhibition purposes.
According to a report published in September by the U.S. non-profit think tank Information Technology and Innovation Foundation (ITIF), China’s display capital expenditure (CAPEX) share is expected to reach 85% by 2027.
#LGDisplay #JeongChuldong #transparentOLED #OLEDmarket #LGElectronics #Chinesecompetition #technologicalleadership #CES2024 #microLED #displayindustry #globalmarket
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- Amid Lotte Group's Liquidity Concerns, Lotte E&C's Financial Recovery Highlights 'Firefighter' Park Hyun-chul
- Lotte E&C’s improving financial stability is expected to play a significant role in alleviating market concerns about liquidity within the Lotte Group.
Park Hyun-chul, Vice Chairman and CEO of Lotte E&C, who was brought in to resolve the company’s prolonged liquidity crisis, is receiving credit for his efforts to improve the financial structure.
On November 19, Lotte Chemical, Lotte E&C’s parent company, will hold a bondholder meeting at Lotte World Tower in Songpa-gu, Seoul.
The bondholder meeting was triggered by an event of default (EOD) that occurred on certain public bonds issued by Lotte Chemical.
If an event of default is declared, creditors gain the right to demand immediate repayment, and the debtor loses the right to use the loan until maturity.
Lotte Chemical aims to negotiate amendments to bond covenants during the meeting to prevent bondholders from declaring an event of default.
However, the securities and investment banking sectors anticipate that bondholders will not declare an event of default, as Lotte Group has been working to dispel liquidity concerns at the group level.
Lotte Group also entered into a payment guarantee agreement worth KRW 2.5 trillion (USD 1.8 billion) with four major commercial banks (KB Kookmin, Shinhan, Hana, and Woori). This payment guarantee virtually eliminates the risk of non-payment for Lotte Chemical bonds.
For this payment guarantee agreement, Lotte Group reportedly provided Lotte World Tower—its symbolic asset with a current value of KRW 6 trillion (USD 4.3 billion)—as collateral.
Lotte Group plans to use the Lotte Chemical bondholder meeting as an opportunity to completely eliminate financial covenants related to events of default and put liquidity concerns to rest.
The group is also taking legal action, such as reporting to investigative authorities, to counter market rumors such as “Lotte Group could disband” and block any further spread of financial instability concerns.
While debates continue in the market about the financial stability of Lotte Chemical and the group as a whole, Lotte E&C appears to have distanced itself from the controversy.
Lotte E&C has faced liquidity challenges related to project financing (PF) since 2022, stemming from the “Gangwon Jungdo Development Corporation rehabilitation case,” commonly referred to as the Legoland incident.
Park, known as a financial expert within Lotte Group, was appointed to resolve Lotte E&C’s crisis in December 2022.
Thanks to Park’s efforts, Lotte E&C has achieved visible improvements in its key financial indicators this year.
According to Lotte E&C’s Q3 2024 business report, its PF guarantee volume stood at KRW 4.3113 trillion (USD 3.1 billion) as of the end of September, a 20.2% decrease from KRW 5.4 trillion (USD 3.9 billion) at the end of 2023.
Its borrowing levels have also decreased. Lotte E&C’s borrowings and bonds amounted to KRW 2.379 trillion (USD 1.7 billion) in Q3 2024, representing a 15.3% (KRW 430.6 billion or USD 310.5 million) reduction compared to KRW 2.809 trillion (USD 2 billion) at the end of 2023.
The debt-to-equity ratio also dropped from 235% at the end of 2023 to 217% in Q3 2024.
The success of Lotte E&C’s financial restructuring efforts has also had a positive impact on Park’s tenure.
Despite severe headwinds in the construction industry this year, which resulted in leadership changes at 7 of the top 10 construction companies, Park successfully secured his reappointment.
Park is expected to intensify efforts to further improve the financial structure in 2025.
During a corporate briefing for institutional investors following the November 29 executive reshuffle announcement, Lotte Group unveiled its plan to reduce Lotte E&C’s debt by KRW 1 trillion (USD 721 million), lowering its debt-to-equity ratio to 187.7% by the end of this year.
The group aims to increase cash assets to KRW 1.3 trillion (USD 940 million) and reduce borrowings to KRW 1.9 trillion (USD 1.4 billion).
It also plans to reduce contingent liabilities from KRW 3.66 trillion (USD 2.6 billion) in 2024 to KRW 2.47 trillion (USD 1.8 billion) in 2025. Through guarantees from the Housing and Urban Guarantee Corporation (HUG), the final target is to manage contingent liabilities to below KRW 2 trillion (USD 1.4 billion).
#LotteE&C #ParkHyunchul #LotteGroup #financialstability #liquidityimprovement #PFguarantees #debtmanagement #constructionindustry #LotteChemical #businessrestructuring
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- GS E&C’s Heo Yoon-hong Delivers Solid Results, Focuses on Stability with Restructuring
- Heo Yoon-hong, President and CEO of GS Engineering & Construction (GS E&C), has demonstrated solid performance in his first year in office while maintaining a cautious management approach.
Heo's focus on strengthening internal stability in the recent organizational restructuring suggests that he will continue prioritizing stability and building customer trust next year.
According to industry sources on the 18th, Heo has achieved this year’s order target early, significantly improving GS E&C’s outlook for future performance. GS E&C secured KRW 12.961 trillion in new orders as of the third quarter.
In the fourth quarter, GS E&C announced major contracts, including the Northeast Asia LNG Hub Terminal Phase 1 (KRW 587.9 billion), the Sewoon 5-1, 3 Redevelopment Project (KRW 424 billion), the Ichon Hangaram Remodeling Project (KRW 594.8 billion), and the Melbourne Circular Railway Project in Australia (KRW 520.5 billion). Excluding smaller projects that fall below the disclosure threshold, fourth-quarter orders alone totaled KRW 2.1 trillion.
This brings GS E&C’s total new orders this year to over KRW 15 trillion, far surpassing its annual target of KRW 13.3 trillion. This marks a significant rebound after missing last year’s KRW 14.5 trillion target, achieving only KRW 10.188 trillion, which was nearly 30% short of expectations.
Many attribute GS E&C’s underperformance in 2023 to the collapse of an underground parking lot at an apartment complex in Incheon’s Geomdan district in April. Overcoming this setback within a year, GS E&C has successfully recovered its order performance.
A key highlight of this year’s results is the balanced order intake across domestic and international markets. GS E&C secured KRW 6.366 trillion domestically and KRW 6.595 trillion overseas as of the third quarter. Overseas orders significantly exceeded those of previous years, with KRW 2.333 trillion in 2022 and KRW 2.465 trillion in 2023.
While GS E&C’s overseas revenue accounted for 20% in 2022 and 19% in 2023, it stood at 18% in the first three quarters of 2024. With increased overseas orders, the regional revenue mix is expected to diversify further.
GS E&C’s financial performance this year is also expected to show visible improvement. While the company is unlikely to meet its annual revenue target of KRW 13.5 trillion, with estimates at KRW 12.766 trillion according to financial data provider FnGuide, operating profit is projected to rebound into the black.
GS E&C’s operating profit is forecast at KRW 340.2 billion, a sharp recovery from last year’s operating loss of KRW 387.9 billion. In 2023, the company incurred significant costs, including KRW 552.4 billion in reconstruction expenses following the Geomdan accident and quality control and safety enhancement costs in the fourth quarter.
Despite the successful turnaround in orders and performance, Heo’s organizational restructuring, effective January 1, 2024, reflects his emphasis on internal stability rather than aggressive expansion.
GS E&C will reduce its business divisions from six to three, retaining the Building & Housing Division, Infrastructure Division, and Plant Division, which form the core of its construction operations. The New Business Division, Green Business Division, and Australia Business Division will be integrated into the remaining divisions or reorganized into smaller units.
The changes to the New Business Division highlight Heo’s current management principle of focusing on core stability. GS E&C had elevated its New Business Division from a task force in 2020, marking it as the first among major construction firms to establish a dedicated division for new business exploration. Notably, Heo had directly overseen this division since 2018 when he served as Executive Vice President.
In pursuit of organizational efficiency, Heo has also streamlined the company’s structure. GS E&C has simplified its management hierarchy from a three-tier system of headquarters, groups, and departments to a two-tier structure of divisions and units. Executive ranks have also been reduced to three levels—President, Vice President, and Executive Director—by merging Senior Vice President and Vice President roles.
Regarding the changes, GS Group stated, “As GS E&C focuses on overcoming challenges like the construction market downturn, the restructuring will allow for quicker responses to business environment changes through integration and simplification. Faster communication across all levels will enable GS E&C to focus more on its core operations.”
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- Samsung Stocks Diverge: Restructuring Opportunity for Lee Jae-yong?
- Samsung Group’s governance restructuring may be triggered as the stock prices of Samsung Electronics and Samsung Biologics show diverging trends.
There is growing analysis that if Samsung C&T swaps its shares in Samsung Biologics for Samsung Electronics shares currently held by Samsung Life Insurance and Samsung Fire & Marine Insurance, Chairman Lee Jae-yong could significantly increase his control over Samsung Electronics. This could also initiate efforts to transform Samsung C&T into a holding company.
According to industry sources on the 18th, Samsung Group is expected to actively leverage the recent decline in Samsung Electronics’ stock price and the sharp rise in Samsung Biologics’ stock price to address its governance structure.
Samsung Electronics’ stock price has fallen by more than 30% this year. On November 15, Samsung Electronics announced plans to repurchase KRW 10 trillion worth of treasury shares over the next year, with KRW 3 trillion to be acquired and canceled within three months. Despite this, the stock price has remained stagnant.
In contrast, Samsung Biologics’ stock price has surged by more than 23% this year and has climbed close to 150% over the past five years. Meanwhile, Samsung Electronics’ stock price has dropped approximately 2% during the same period.
While this trend is concerning for Samsung Electronics shareholders, it presents an opportunity for Chairman Lee, who needs to strengthen his control over the company.
Currently, Lee Jae-yong and his family directly hold less than 5% of Samsung Electronics’ shares. Lee owns 1.63%, Hong Ra-hee, former director of Samsung Museum of Art (Leeum), holds 1.64%, Lee Boo-jin, president of Hotel Shilla, owns 0.80%, and Lee Seo-hyun, president of Samsung C&T, holds 0.79%—a combined total of 4.86%.
In comparison, Lee’s stake in Samsung C&T stands at 19.06%. Samsung C&T is the largest shareholder of Samsung Life Insurance, which holds 8.51% of Samsung Electronics shares. Samsung C&T also directly owns 5.01% of Samsung Electronics. Essentially, Lee controls the group through Samsung C&T.
However, the connection between Samsung C&T and Samsung Electronics remains weak, raising concerns that Samsung Electronics may be vulnerable to hostile takeovers. Foreign investors own approximately 51% of Samsung Electronics, and their future actions cannot be ruled out. In the past, BlackRock in 2018 and Elliott Management in 2016 called for improvements in Samsung Electronics’ governance structure.
If Samsung C&T leverages its stake in Samsung Biologics, these vulnerabilities can be partially addressed. Samsung C&T holds 43.06% of Samsung Biologics, currently valued at approximately KRW 30 trillion.
If Samsung C&T swaps these shares for Samsung Life Insurance’s 8.51% stake (worth KRW 27 trillion) and Samsung Fire & Marine Insurance’s 1.49% stake (worth KRW 4.8 trillion) in Samsung Electronics, Samsung C&T’s direct ownership in Samsung Electronics could jump to 15%.
An industry official commented, “The decline in Samsung Electronics’ stock price benefits the owner family’s efforts to strengthen their control over the company. Investment banks predict that Samsung C&T may acquire a portion of Samsung Life Insurance’s stake or swap Samsung Biologics shares for Samsung Electronics shares.”
The official also noted, “The decision to retain Vice Chairman Chung Hyun-ho, head of the Business Support Task Force (TF), appears to align with next year’s governance restructuring plans.”
However, converting Samsung C&T into a holding company will require significant capital and may take longer than expected. Under the Fair Trade Act, holding companies are required to own at least 30% of their subsidiaries. Even with the proposed share swaps, Samsung C&T would need an additional KRW 40 trillion to meet the requirement.
The law provides a two-year grace period for completing the conversion. If the requirements are not met within two years, the Fair Trade Commission can grant an additional two-year extension upon approval.
Some analysts suggest that Samsung Group may focus on further boosting Samsung Biologics’ corporate value before advancing its governance restructuring plans.
Kim Soo-hyun, a researcher at DS Investment & Securities, stated, “Inheritance tax burdens for the Samsung owner family could weaken their control over Samsung Electronics. Strengthening Samsung C&T’s and the owner family’s control over Samsung Electronics, along with fostering Samsung Biologics, has become a critical group-wide task.”
#SamsungGroup #SamsungElectronics #SamsungBiologics #LeeJaeyong #GovernanceRestructuring #SamsungC&T #ShareSwap #SamsungLife #CorporateGovernance #FairTradeAct
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- Hanwha Ocean Delays Ship Deliveries; Stabilization Key for Kim Hee-chul
- Stabilizing the shipyard's production process is expected to be Hanwha Ocean CEO Kim Hee-chul's top priority for next year.
Hanwha Ocean has recently struggled to meet delivery deadlines for container ships under construction, repeatedly extending the timelines. These contracts were signed during the Daewoo Shipbuilding & Marine Engineering (DSME) era. The company explained that delays occurred due to the aftermath of subcontractor union strikes, design changes requested by shipowners, and material supply delays.
Since Hanwha Group acquired DSME last year, the company has faced criticism for failing to stabilize production at its shipyards. Consequently, while competitors like HD Hyundai Heavy Industries and Samsung Heavy Industries are achieving record performance amid the "shipbuilding boom," Hanwha Ocean's stagnating results have been attributed to these production issues.
According to reports on the 17th, delivery schedules for some vessels ordered in 2021 are being delayed as their delivery deadlines approach.
The company recently announced multiple delivery extensions for ships under construction. In October, it extended the delivery deadlines for four ultra-large LNG carriers and four container ships by five months and three months, respectively. On December 12, the company extended the final delivery schedule for six ultra-large LNG-fueled container ships by six months.
The company stated that whether liquidated damages for delays will be incurred will be determined through negotiations with shipowners at the time of delivery.
The scale of the delayed contracts is as follows:
- **4 LNG carriers:** US$845.8 million (KRW 990 billion)
- **4 container ships:** US$536.2 million (KRW 640 billion)
- **6 LNG-fueled container ships:** US$993.8 million (KRW 1.12 trillion)
A company representative told *Business Post*, “The October delays were caused by material supply delays and a temporary halt to lashing bridge installation due to safety inspections. The delays announced on December 12 stemmed from disruptions caused by subcontractor strikes two years ago during the DSME era, material delays, and shipowner-requested design changes.”
During its Q3 earnings conference, the company explained, “The initial pre-erection processes (before block installation in the dock) are progressing as planned, but subsequent processes in the dock are slower than expected. However, we anticipate stabilization in the latter half of the year.”
Shipbuilding processes are generally divided into pre-erection and post-erection stages, based on block installation. Pre-erection involves fundamental work, such as piping and electrical installations on ship blocks. Post-erection involves assembling these blocks in the dock, completing interior work, and launching the vessel.
As of late November, Hanwha Ocean recorded orders worth US$8.15 billion (KRW 11.3 trillion), more than double last year’s US$3.52 billion (KRW 4.88 trillion). However, cumulative operating profit through Q3 remained at KRW 68.9 billion, with a net loss of KRW 51.2 billion. Without production stabilization, significant profit margin improvements next year appear uncertain.
Other shipbuilders, such as HD Korea Shipbuilding & Offshore Engineering (HD Hyundai Heavy Industries, HD Hyundai Samho, and HD Hyundai Mipo) and Samsung Heavy Industries, have already stabilized their production processes and are benefiting from the shipbuilding boom.
HD Korea Shipbuilding reported a cumulative Q3 operating profit of KRW 935 billion and net profit of KRW 727.5 billion. Samsung Heavy Industries achieved an operating profit of KRW 328.5 billion and net profit of KRW 153.2 billion.
Addressing concerns that production delays may hinder next year’s results, a company representative asserted, “All processes are now in the normalization stage.”
Oh Ji-hoon, an analyst at IBK Investment & Securities, predicted, “From 2025 onward, significant improvements are expected due to reduced costs from production disruptions, stabilization through foreign workforce integration, a decreasing proportion of loss-making container ship orders, and increased construction of high-value LNG carriers.”
Born in 1964, Kim Hee-chul graduated from Seoul National University with a degree in Chemical Engineering. He joined Hanwha Chemical (now Hanwha Solutions) in 1988 and subsequently held key positions at Hanwha Total, Hanwha General Chemical, Hanwha Q Cells, Hanwha Energy, and Hanwha Impact before officially becoming Hanwha Ocean CEO in October.
This year, Hanwha Ocean acquired wind power and plant businesses from Hanwha Group and acquired the Singapore-based offshore facility company Dynamac Holdings, signaling its entry into the marine and energy sectors.
#HanwhaOcean #KimHeeChul #ShipbuildingDelays #LNGCarriers #ContainerShips #ProductionStabilization #KoreanShipbuilding #DaewooShipbuilding #HDHyundai #SamsungHeavyIndustries
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- Kim Sun-hee Faces First Crisis: "Rinse Water Incident"
- On the 17th, the retail industry cautiously predicted that Maeil Dairies would face inevitable damage to both its corporate image and performance due to the recent *"contaminated rinse water"* incident.
According to Maeil Dairies, on September 19, during the production of the *“Maeil Original Milk 200ml Sterilized Mid-Pack”* at the Gwangju plant, a valve malfunction caused rinse water to mix into the product for one second.
Although the number of affected products was reported to be about 50, Maeil Dairies decided to recall all 15,000 units produced on September 19.
The retail industry believes that given the key demographics for dairy products, consumers will closely monitor the situation for some time. Milk products are primarily consumed by children, which makes customers especially sensitive to quality issues.
Indeed, criticism of Maeil Dairies has already spread across online parenting communities. Comments include: *“This is a product where you insert a straw, so who would check inside before drinking?”*, *“I’m furious thinking my child could have drunk this”*, and *“I’m never buying Maeil Milk again.”*
Approximately 60% of Maeil Dairies' total revenue comes from dairy products. If this incident leads to mistrust in Maeil products, a decline in sales will be unavoidable.
However, some support Maeil Dairies on social media, acknowledging disappointment but praising the company for its relatively swift response. These voices of support offer a positive outlook for the company amid the crisis.
Maeil Dairies' biggest concern is that the controversy may persist. Prolonged negative discussions could jeopardize fourth-quarter sales.
Maeil Dairies has reported consistent annual revenue growth from 2017 through last year. Its cumulative revenue for the first three quarters of this year reached KRW 1.3506 trillion (US$ 974 million), a 0.7% increase compared to the same period last year.
Given that revenue growth is already marginal, this quality scandal has cast doubt on Maeil Dairies’ ability to achieve its seventh consecutive year of growth.
In response to consumer concerns, Maeil Dairies posted two public apologies: one on the 13th, signed by all employees, and another on the 16th, signed by Vice Chairman Kim Sun-hee.
Despite these efforts, the controversy has not subsided. Convenience stores CU and Emart24, along with Lotte Mart, suspended sales of the sterilized mid-pack product on the 14th. GS25, Seven-Eleven, and Emart did not originally carry the product.
This decision was not made at Maeil Dairies’ request. CU, Emart24, and Lotte Mart preemptively halted sales after being informed of the incident, citing consumer concerns. The timeline for resuming sales has not yet been decided.
Although Seven-Eleven does not sell the specific product, it decided to discard inventory of the similarly packaged *“Maeil Original Milk 200ml”* product as a precaution.
This incident presents a significant test of crisis management for Vice Chairman Kim Sun-hee, who has not faced such controversies in her 10-year leadership of Maeil Dairies.
Kim Sun-hee is the cousin of Kim Jeong-wan, Chairman of Maeil Holdings and eldest son of founder Kim Bok-yong. She served as CEO of Maeil Dairies from 2014 before being promoted to Vice Chairman last year.
Before joining Maeil Dairies in 2009, Kim worked in the financial industry, holding positions at BNP Paribas Seoul, Crédit Agricole Seoul as an analyst, and Citibank Korea as head of trust risk management.
Many industry insiders believe her non-retail background has worked to her advantage. Since taking office, Kim launched the adult nutrition brand *"Selex"* and the plant-based product *"Almond Breeze,"* both of which became market leaders.
Maeil Dairies previously faced a similar quality controversy in 2011. In March 2011, *Staphylococcus aureus*, a food poisoning bacteria, was detected in formula milk, leading to a recall. Additionally, some formula milk exported to China was deemed unsuitable and destroyed.
In the aftermath, Maeil Dairies’ market share in the formula sector dropped by over 10 percentage points, with *Ildong Foodis* overtaking it for second place.
#MaeilDairies #MilkRecall #RinseWaterIncident #KimSunHee #CrisisManagement #DairyIndustry #ConsumerTrust #ProductSafety #MaeilMilk #QualityScandal
