[Focus] Age of the Fourth Industrial Revolution, Ambitious Challenges and Tasks of Cho Hyun-joon, Chairman of Hyosung Group

In the midst of the Fourth Industrial Revolution that is taking on the world like a tsunami, the move of Mr. Cho Hyun-joon, Chairman of Hyosung Group, a representative synthetic fiber company of South Korea, is attracting attentions in the new year of 2020.

Hyosung has a strategy to grow carbon fibers to a top brand along with the existing world leading products, spandex and tire cords.

Hyosung has made a blueprint of leaping toward the global ‘top 3’ by investing 1 trillion won into the field of carbon fibers for 10 years up to 2028, and plans to start investment in earnest and see the results from the year 2020.

Carbon fibers are an item of material industry closely associated with hydrogen economy strongly promoted by the Korean government. Although the weight of carbon fibers is a fourth of that of steel, their strength and elasticity are 10 times and 7 times those of steel, respectively, and therefore, they are highlighted as the ‘meal of future industry’. Carbon fibers are the ‘new material of dream’ that can be applied to almost all industries ranging from interior and exterior materials for vehicle industry to sports and leisure industry and aerospace industry.

Hyosung has a current production capacity of 2000 tons per annum, and will increase it to 24,000 tons per annum by 2028. This will be the largest capacity in the world for a single production. The global market share will also rise from the current 2% to 10%. Hyosung has been working on the first expansion of its Jeonju factory since last year, and will commence the production of carbon fibers at a 2000 ton scale from February this year.

◇ ‘Meal of Future Industry’ Carbon Fiber, ‘New Material of Dream’ Lighter but Stronger than Steel

The applicable areas of carbon fibers called the ‘meal of future industry’ are limitless. They are the new materials of dream that can be used in any industry where steel is used ranging from interior and exterior materials for vehicles, and stiffeners for construction to sport and leisure areas and aerospace industry. Particularly, carbon fibers are lighter than steel by a fourth, but stronger by 10 times and more elastic by 7 times than steel.

Their corrosion-resistance, conductivity and thermal resistance are much superior. However, as they are strategic materials used in aerospace and defense industries, technology transfer is not easy, and independent development is also difficult. Thus, the countries that have carbon fiber technology are very few.

Mr. Cho’s policy of large scale investment in carbon fibers is also consistent with the management philosophy of his father, Honorary Chairman Mr. Jo Seong-nae. Honorary Chairman Jo has directed the development of carbon fibers since the early 2000s, and supported the intensive R&D on carbon fibers with the motto “Enter when nobody else is going there”.

Hyosung started development of carbon fibers from 2008 in earnest, and developed successfully the carbon fiber TANSOME® in 2011 for the first time in South Korea, manufacturing the product from 2013. This was the fourth development in the world following Japan, the US and Germany.

If Mr. Cho’s plan is proceeding without any problem, Hyosung will step up to No. 3 in the carbon fiber market share by 2028.

Hyosung’s spandex is also a successful case for which Hyosung decided independent development as a late comer with almost no technology of its own in 1991.

Under the circumstances where Germany, the US and Japan had the most advanced technology of spandex, Hyosung R&D team experienced a series of failures, but finally succeeded in developing spandex for the fourth time in the world with its own technology through persistent challenge and investment.

Currently, Hyosung has the largest market share in spandex, which has become the product that represents the technology side of Hyosung.

Hyosung Chairman Mr. Cho said, “We will play a crucial role in the construction of material powerhouse Korea with a tenacious focus on original and independent technology such as spandex and carbon fibers.”
Mr. Cho emphasized, “The reason that we could get up to No. 1 in many areas including spandex and tire cords is because we were stubborn about technology to win over competitors by developing our own technology from materials to manufacturing processes,” and added, “In order to sow the seeds for other material industry, we keep challenging to other new material areas including polyketones we have developed for the first time in the world.”

◇ Hyosung Spandex, Selected as the World Class Product for 8 Years in a Row

Hyosung’s spandex brand Creora led by Mr. Cho has been selected as the world class product for 8 years in a row. Creora is considered to be an achievement of technological management for the three generations of Cho Hong-je, Jo Seong-nae and Cho Hyun-joon, and has defended its global No. 1 place with the 30% market share since taking the top spot in 2010 based on the company’s original technology and global production networks including China, Vietnam and Brazil.

Spandex is a high value-added functional synthetic fiber, called ‘semi-conductor of fibers’. It has excellent elasticity that allows stretching 5 – 7 times its original length, and has a 97% recovery rate. Spandex is used in almost all clothing products ranging from women’s underwear, stocking and swimsuit to denim, outdoor clothing as well as formal suit.

Hyosung has been investing constantly in R&D and building up technology even after it successfully developed spandex first in Korea in 1992. 

Hyosung’s original technology has become the foundation of its differentiation strategy. It has developed various customized functional products such as Creora Fresh, which can eliminate odor including sweat smell, Creora Color Plus with superior dyeing characteristics and wash fastness and Creora Highclo with superior chlorine resistance and durability by focusing on development of high functional products rather than general products.

Hyosung reached out to customers first to identify their needs even before they knew what they would need, and ensured what it found would lead to development of products.

Hyosung strengthened collaboration with not only primary customers such as textile manufacturers but also customers of primary customers such as clothing companies. It was to build up a long-term business relationship such as strengthening the market trend identification and information exchanges, and based on these, developing and supplying new fibers and textiles. 

Hyosung has selected target brands at each base area in Indonesia, Vietnam and Europe, and proposed design of various concepts including athleisure, casual or outdoor look according to trends or customers’ tastes to clothing brands, which resulted in good business.

It proposed to launch athleisure products using fibers with cold-sensing and ultraviolet protection functions in the hot Vietnamese region, and supplied fibers with excellent dyeing characteristics to Brazilian customers who preferred primary colors, both of which were favorably received.

Hyosung TNC has established the smart factory in seven global spandex factories including Quzhou, Jiaxing, Guangdong and Zhuhai of China, Dongnai in Vietnam, Brazil and Turkey. This was to further enhance competitiveness in manufacturing by becoming capable of collecting, analyzing, and controlling data such as product status or facility situations in all the processes from import of raw materials to production and shipment.

The company can monitor and manage the current status of its global plants in real time so that it has the production environment that can manufacture the same quality products anywhere. 

◇ Trial Risks hindering Chirman Cho' Challenge

Hyosung Chairman Mr. Cho Hyun-joon is about to run to 2020 with a great ambition, but there are many concerns that several trial risks could be obstacles.

According to the law experts, an appeals trial involving Mr. Cho's alleged embezzlement and breach of trust worth 20 billion won will begin on January 22.

Mr. Cho was accused of receiving a refund, which was inflated 11 times the value of his share, from Galaxia Electronics (GE) to raise fund for payback when he was put under the pressure of re-buying his investment stake due to the failure to list GE in 2013. He was also accused of causing damage to the company by having incorporated personal artworks into Hyosung Art Fund at a high price, and making unfair gains by falsely hiring employees who have never worked.

The first trial found him guilty of inflicting damage on the company by incorporating personal artworks at a high price and receiving pay by falsely hiring employees, and not guilty of violating the Act on the Aggravated Punishment, etc of Specific Economic Crimes, in which he was refunded with stocks of the inflated value, leading to the sentence of two years in prison. However, Mr. Cho appealed against the decision, and the trial was handed over to the appeal court.

Mr. Cho is also awaiting the Supreme Court's decision regarding the alleged tax fraud, which was indicted along with Honorary Chairman Mr. Jo Seong-nae. Mr. Cho is suspected of embezzling 1.6 billion won by using his corporate card personally, and evading 7 billion won in gift taxes using a paper company.

In addition, Honorary Chairman Mr. Jo reportedly committed irregularities amounting to 800 billion won, including 501 billion won in accounting fraud and 150.6 billion won in tax evasion. The first and second trials sentenced Honorary Chairman Mr. Jo to three years in prison and Mr. Cho to one-and-a-half years in prison with a suspended sentence for three years. Both Mr. Cho and the prosecution appealed, and a ruling is expected in the first half of next year as the third division of the Supreme Court in charge of the case began the hearing last September.
 
An investigation has also been underway into allegations that the Cho family, including Mr. Cho and Honorary Chairman Mr. Jo, had used multi-billion won of their company's money to cover legal costs for private lawyers and criminal cases since 2013.

Late last year, police sent the case of Mr. Cho and Honorary Chairman Mr. Jo to the prosecution with the recommendations for indictment.

A source from the business community said, "It is regrettable that Mr. Cho Hyun-joon’s ambition is hampered by court risks even though new-generation managers armed with high-tech knowledge like him should play a big role in the wake of the Fourth Industrial Revolution," and added he expected that "the government, the legal circles and the business community should support Mr. Cho in line with this direction so that he can run the company more actively.”

[Kim Ji-Hyung /Staff Reporter]