Old Leader, New Direction
SK Group Chairman Chey Tae-won said to the heads of the group's key affiliates on Aug. 17, “Please come up with innovative investment expansion measures. Although we are facing difficult management conditions and environment, I’m ready to suffer hardships.” It means that he is aware of practical problems that professional executives cannot make bold investment decisions under an uncertain management environment, and he will bear all responsibilities from the bold decisions thaty they make.
In his first meeting with the CEOs of the group’s 17 major affiliates, Jeong Chul-gil, chief at the Strategy Committee of SK Supex Promotion Council and CEO of SK Innovation, and Park Sung-wook, CEO of SK Hynix, presented a concrete plan to invest 46 trillion won (US$38.88 billion) in the semiconductor sector. SK Hynix seems to be investing 46 trillion won (US$38.88 billion) in building more production lines.
The company needs to invest in SK Hynix’s new M14 plant, which will soon be completed. Although it has already spent 2.38 trillion won (US$2.01 billion) on building the latest memory semiconductor production M14 plant, it will inject a considerable amount of money into production equipment in the plant. SK Hynix is also planning to advance the plant expansion plan and build two extra production lines in succession.
After SK Hynix merged with the SK Group led by Chey in 2011, it has become a major affiliate that has recorded its highest results the last two years in a row. The annual investment size has increased from around 8 trillion won (US$6.76 billion) before the takeover of Hynix to 13 or 14 trillion won (US$10.99 to $11.83 billion) after the merger. The firm will also take the lead in the investment expansion of the SK Group in the future.
As Chey accepted the investment plan in the semiconductor sector, he then pushed the executives to come up with measures to make extra investments towards other IT, energy, and chemical affiliates. Accordingly, SK Innovation and SK Telecom, the major affiliates of each sector, are expected to come up with concrete and bold investment plans soon.
SK Innovation will focus on the petroleum development business in North America, building a new factory to produce high-performance polyethylene in Saudi Arabia and the electric vehicle batteries business. As SK Innovation has struggled to make profits in the oil refining business, which account for more than 70 percent of its sales ratio, it has made efforts to expand its new business areas to the resource development, petrochemical, and battery sectors.
However, it has failed to make noticeable achievements, as the head of the group, who could make decisions on bold investments and M&As, was absent. Although SK Innovation has invested nearly 10 trillion won (US$8.45 billion) in the last five years, it is expected to invest 10 percent more money in the next five years by 2020.
SK Telecom will seek out new information communication technology convergence businesses such as the Internet of Things and smart homes. With the communication business, which is limited to the domestic market, reaching the ceiling, it will also strengthen its strategy to tap into the global market. Moreover, annual investments will double from 1 to 2 trillion won (US$845.31 million to $1.69 billion).
If the three major affiliates of the group carry out aggressive investments, the SK Group will invest nearly 80 trillion won (US$67.62 billion) by 2020. A spokesperson from the SK Group said, “We are still considering the specifics of the investment plan, but we will come up with an innovative investment plan as Chairman Chey requested.”