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| A photograph of SK Innovation's plant in Ulsan / Courtesy of SK Innovation |
By Nam Hyun-woo
SK Group's new growth businesses of semiconductors, 5G and biopharmaceuticals are gaining market attention in the wake of the COVID-19 outbreak, as they become key elements of the non-face-to-face economy and the healthcare industry.
SK said it could establish its current status as an industrial leader after successfully handling three major changes in industrial hegemony in the past, and the group's current portfolio will become a "launch pad" for SK to jump forward amid the major changes stemming from the pandemic.
Highlighting the portfolio is semiconductors, whose significance is ever-growing amid the expansion of data- and visual-intensive products such as video streaming and webcam conferences. This has been leading the healthy demand for server chips for data centers at leading service providers such as Amazon Web Services and Microsoft.
SK has already built a semiconductor value chain within its group, including chipmaker SK hynix and chip material firms of SK Siltron, SK Materials, SK Trichem and SK Showa Denko.
The group said it is also pinning hopes on SK Telecom's 5G business, as it will play a pivotal infrastructural role for transmitting exponentially increasing amounts of data in the digital economy.
Showing the sharpest growth recently is the group's biotech business. Earlier this month, SK Biopharmaceuticals' partial-onset seizure treatment XCOPRI began its sales in the U.S., after winning U.S. Food and Drug Administration (FDA) approval last November. The firm also licensed out sleep disorder treatment Solriamfetol to Jazz Pharmaceuticals, which won European Medicines Agency approval for sale in January.
SK Group said those firms are the clues to its growth strategy for the post-pandemic era, and will power its growth momentum.
SK Group has had three major growth moments in its history since 1953.
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| Sunkyong Group Chairman Chey Jong-hyon |
The Korean government requested help from the late Chey Jong-hyon, chairman of Sunkyong (now SK), who was attempting to establish a refining facility in Ulsan after securing a promise from Saudi Arabia to supply 150,000 barrels of crude per day.
Though Sunkyong's plan to set up the facility was disrupted due to the oil crisis, Chey visited the ruling family of Saudi Arabia and then Minister of Oil and Mineral Resources Ahmed Zaki Yamani, and won a promise allowing Korea to receive all of its oil imports from Saudi Arabia starting December 1973.
Chey's network in Saudi Arabia also helped Sunkyong to cope with the aftermath of the second oil shock in 1979, with Yamani again promising to provide the company 50,000 barrels of crude per day.
This helped Sunkyong to become Korea's leading refiner. In 1980, the government decided to privatize the state-run Korea Oil Corporation (KOC) and selected Sunkyong as the acquirer acknowledging the company's ability to secure crude oil and financing. The KOC was renamed Yukong in 1982 and is now known as SK Innovation.
After standing as one of Korea's leading conglomerates in the 1980s, Sunkyong selected the telecom business as its new growth driver. The group first set up a telecommunication team in its U.S. Management Planning Office in 1984 and set up Sunkyong Telecom in 1991.
A year after its establishment, Sunkyong Telecom changed its name to Daehan Telecom and joined a government auction for a license to operate the country's second mobile carrier.
In the bidding, the Daehan Telecom consortium was selected as the preferred bidder for the license, beating rival consortiums led by POSCO and Kolon, but returned the right just a week after winning it, to defy the controversy over a marriage between Chey's son, Chey Tae-won, and then-President Roh Tae-woo's daughter, Roh So-young. At the time, Sunkyong said it would try again after the Roh administration.
As the bidding for a second carrier ended without a winner, the next Kim Young-sam administration reopened the bidding in 1993, as well as privatizing the existing state-run mobile carrier, Korea Mobile Telecommunications Corp.
Daehan Telecom, however, had to give up its bid again, because the government appointed the Federation of Korean Industries (FKI) to select the winner. Since Chey was the FKI chairman, the group had to give up on its bid for the license to avoid controversy, and tapped into the acquisition of Korea Mobile Telecommunications Corp., which was more costly.
In 1994, Sunkyong purchased a 23 percent stake, or 1.28 million shares, in Korea Mobile Telecommunications Corp. at 335,000 won per share. At the time, the shares were traded at 300,000 won but Sunkyong purchased them at a higher price in order to prevent potential controversy.
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| An aerial view of the SK hynix plant in Icheon, Gyeonggi Province / Courtesy of SK hynix |
In the 2000s, current SK Group Chairman Chey Tae-won focused on finding new businesses to provide fresh growth momentum to its existing portfolio of telecommunications and refining.
To seek growth in semiconductors, Chey first came up with the idea of acquiring Hynix, a former Hyundai Group unit, in 2011, but faced strong opposition from some SK Group senior executives who cited an acquisition price of trillions of won and mounting uncertainties in the semiconductor industry.
However, Chey persuaded the executives and in 2012 the group acquired a 21 percent stake in Hynix for 3.4 trillion won.
The gamble paid off, with SK hynix becoming the second-largest cap on the Korean bourse with a market cap of 64 trillion won, up from 16 trillion won in 2011. Currently, SK hynix is the world's No. 2 memory chip maker.
