The SK Group announced a plan to invest up to 17 trillion won this year. Thus, its investments are aggressively made. Analysis says that as soon as SK Group Chairman Chey Tae-woon first announced the fundamental innovation of the group’s business structure through 'Deep Change', the group’s high-level renewal work began with semiconductors and energy front and center.
According to the Korean business world on February 7, the SK Group has been making the most active investment among the top 10 groups with the signing of a contract to acquire a 51 stake in semiconductor wafer maker LG Siltron for 620 billion won through holding company SK Corp. on January 23 as its first step.
On January 26, the group laid out a 17 trillion won investment blueprint for this year. The 17 trillion won is the SK Group’s largest investment volume since its foundation.
Semiconductors which are the group’s core business item, are taking the lead in SK's aggressive investment. The SK Group has reportedly pursued seven major merger and acquisition (M&A) deals in the semiconductor businesses, including its takeover of Hynix Semiconductor for 3.4 trillion won in 2011.
At the end of 2015, the group acquired SK Materials, a maker of specialty gas for semiconductors, and incorporated SK Air Gas. They also strengthened the semiconductor material business by establishing joint ventures SK Showa Denko and SK Trichem together with Showa Denko and Tri Chemical Laboratories, respectively in Japan. Last month, the acquisition of LG Siltron went ahead in order to strengthen the competitiveness of the SK Group’s semiconductor material business.
SK Hynix threw the hat in the ring to acquiring a stake in Toshiba's NAND flash memory business as well. SK Hynix’s acquisition of a 20% stake in Toshiba's NAND business was an extraordinary investment as the 20% stake amounted to 3 trillion won. Toshiba plans to announce its preferred bidder soon. SK Hynix took on taking over the stake in Toshiba in order to boost its competitiveness in the NAND sector which was relatively weak compare to the DRAM sector. SK Hynix is the second largest memory chip maker in the DRAM industry, following Samsung Electronics, but remains the fourth-largest chipmaker in the NAND market. If SK Hynix takes over Toshiba, which is the second largest company in the industry, the Korean semiconductor giant can immediately become a frontrunner with Samsung in the NAND sector.
Last month, LG Siltron was acquired by SK Holdings Inc., but SK Hynix has directly pursued the stake in Toshiba. SK Hynix is a subsidiary of SK Telecom and a sub-subsidiary of SK Corporation. According to the Fair Trade Act, a sub-subsidiary must acquire a 100% stake in order to acquire a sub-sub-subsidiary. This is why SK Corp absorbed LG Siltron instead of SK Hynix. However, the Fair Trade Act applies to domestic acquisitions only. Therefore, SK Hynix can cut M&A deals with overseas companies such as Toshiba.
The core business of SK, along with semiconductors, the energy sector is also playing a pivotal role in the aggressive investment of Chairman Choi. SK Innovation, the mid-holding company in the energy sector, is at the center. On February 2, SK Innovation acquired Dow Chemical EAA which produces high-high-value packaging materials, from Dow Chemical, the first ranker in the US petrochemical industry for 420 billion won by way of SK Chemicals, a subsidiary of SK Chemical,.
The SK Group has also been carrying forward the acquisition of a Chinese petrochemical company, Shanghai Secco. It is said that taking over Shanghai Seco means taking over British Petroleum (BP)’s 50% stake in Shanghai Secco. The 50% stake is valued at over 1.5 trillion won. Earlier, SK Innovation has decided to invest 3 trillion won mainly in non-refining sectors such as high-value-added chemicals, petroleum development, and EV batteries, and is planning to use it for M&As.
The acquisition of Dow Chemical EAA signaled the SK Group’s first salvo in its investments for this year. SK Innovation is also handling three to four additional M&A deals. SK Hynix is planning to invest 7 trillion won in facilities this year in addition to the acquisition of the stake from Toshiba. "SK Telecom, an affiliate of SK Telecom, has also announced plans to invest 11 trillion won over the next three years, but this year's investment will focus on semiconductors and energy," said an official at the SK Group. “It is not an exaggeration to say that the will for the “deep change” innovation of Chey Tae-won, chairman of the SK Group, depends on the two companies."