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S. Korean Companies Prefer Forming Joint Ventures to Establishing Subsidiaries
For Risk Sharing
S. Korean Companies Prefer Forming Joint Ventures to Establishing Subsidiaries
  • By Jung Min-hee
  • January 15, 2018, 01:30
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SK Global Chemical and Sinopec established China-Korea Petrochemical in China in 2013.
SK Global Chemical and Sinopec established China-Korea Petrochemical in China in 2013.

 

In the past, South Korean companies established local subsidiaries and conducted M&As in most cases to penetrate overseas markets. These days, however, an increasing number of them are opting for risk sharing with local joint venture partners for the same purpose.

The number of such joint ventures is likely to continue to increase for the time being in that the business of South Korean companies in China were negatively affected last year by China's economic retaliation related to THAAD deployment in South Korea. Joint venture establishment has its own side effects though. One of the typical examples is that joint venture partners can absorb their technology.

According to industry sources, SK Hynix is planning to build an additional foundry factory in its DRAM manufacturing plant located in Wuxi, China on a 50-50 joint venture basis. Last year, the market share of SK Hynix in the global foundry market stood at 0.2%. SK Hynix opted for joint venture establishment in order to increase the market share and avoid the side effects of investment at the same time.

LG Display established a joint venture in China in July last year and is planning to build an 8.5-gen OLED plant in Guangzhou. The Ministry of Trade, Industry & Energy gave its approval for the plan after LG Display promised to strengthen its security for tech leak prevention.

Hyundai Motor Company and Thanh Cong Group, a Vietnamese automaker, established a joint venture last year by investing 90 billion won together. Last month, Hyundai Motor Company established a joint venture with Artha Graha Group in Indonesia to build sales networks and an automobile manufacturing plant in the country.

SK Global Chemical and Sinopec established China-Korea Petrochemical in 2013. In addition, SK Global Chemical and JX Energy, a Japanese company, built a paraxylene production plant in Ulsan, South Korea in 2011. GS Caltex, Showa-Shell and Taiyo Oil formed a joint venture in 2012 for a paraxylene production plant with an annual capacity of one million tons in Yeosu, South Korea.