For 30 years, Hansung GT has led the domestic machine tool slide cover market, supplying telescopic covers (C-Plate covers), bellows covers, and multi-covers to major Korean companies. Today, they are seeking partners to bring Korean advanced technology to the global machine tools industry.
Over the past few years, the South Korean industry has endured a series of supply-chain disruptions, encompassing shortages arising from the COVID-19 pandemic and Japan's restrictions on the export of semiconductor materials in 2019. Consequently, the Korean government and industry have prioritized the establishment of an independent and resilient supply chain on a national scale. From a macroscopic standpoint, what is your evaluation of the strengths of the South Korean industry, and what challenges does it confront?
Due to the Coronavirus pandemic, there was indeed an impact on the political landscape involving China and Japan. However, as we are a parts distributor, we were not significantly affected by the COVID-19 situation.
One positive outcome that emerged during the COVID-19 pandemic was the relocation of our factory in 2020. This move resulted in an increased production capacity, enabling us to respond promptly to customer delivery needs and lead time requirements. Consequently, our export activities saw an upswing amid the pandemic.
Critics argue that the country's large corporate conglomerates have grown to such immense size and diversity that they obstruct the emergence of a robust SME sector. In support of their contention, observers often highlight the fact that while Korean SMEs have a strong track record of serving domestic conglomerates, they encounter challenges in attracting international clients. Do you concur with this argument, and how crucial do you consider the development of a robust SME sector for the South Korean industry?
I don't agree with this criticism. Back in the 1980s or 1990s, the big players always maintained control over small and medium-sized companies. However, SMEs were already aware of this situation and knew they had to strengthen themselves to become more independent from these industry giants. Numerous SMEs continually advancing their technology to higher levels, they achieved a significant degree of independence from the major players. SMEs also expanded their operations beyond Korea, actively seeking export opportunities in other countries. Therefore, in the context of the Korean automobile industry and manufacturing sector, companies that are strong enough to compete effectively tend to fare well.
I encountered a challenging situation during the oil shock when raw material prices soared while our one of customer sought to reduce their procurement costs from us. It was a difficult period, but we managed to overcome these challenges by diversifying our portfolio, leading to increased stability in their operations.
Even when these large companies present unfavorable offers, smaller businesses often feel compelled to accept them, as it's a matter of survival. In our case, however, we have a diverse customer base, including more than ten customers in Japan and others abroad. This diversification allowed us to mitigate these risks.
One significant trend currently shaping the machine industry revolves around the utilization of digital technologies. These technologies serve not only to extend machine lifespans through preventive maintenance but also to gather more data on various processes such as grinding, cutting, and others. I'm curious to know how your firm is harnessing these digital technologies. Is this an area in which you are actively investing?
We offer comprehensive tooling services to our clients, although we don't manufacture all the parts ourselves. We import certain items from overseas, particularly from countries like Switzerland and Germany and sell them to the domestic market. Our partnerships with various international companies provide us with crucial technological support, which strengthens our business.
Our service goes beyond importing and distributing products. We also provide consultation services to our clients. For instance, we don't simply sell products; we offer advice on technology and engineering. Over the course of our 40-year history in this business, we've accumulated a wealth of engineering techniques and know-how, allowing us to internalize advanced engineering practices. This includes our own products and import items.
In 2021, amid the challenges posed by the Coronavirus pandemic, we unfortunately lost a long-standing collaboration with a global seal company that had spanned over four decades. This company used to rely on us for hydraulic and pneumatic systems, a field where we held a 70% share. Despite this setback, we leveraged our accumulated technological expertise to transform this crisis into an opportunity. Since we provide entire hydraulic and pneumatic systems beyond supplying the components, we could expand our client base. Simultaneously, we revisited our product portfolio and uncovered additional engineering technologies that we could offer to the defense industry.
Another illustrative example involves our partnership with a Swiss company in the field of dental implants, which has persisted for over 30 years. Although this company continued the diamond implant project with us, they recently chose another partner for a different implant type. However, given our extensive experience and knowledge in this area, we collaborated with another Swiss company to design and develop the product, outsourcing the production to them. Currently, our processing tools serve a large proportion of the total implant market, and we count most major players in the implant industry, among our clients.
With your extensive history with Japan, including collaborations with companies like Mazak and other machine makers, you have a strong foundation in the machining center sector. Now, as your company expands into the defense and dental industries, what new applications do you plan to target, and where do you see the highest growth potential?
Given our strength in the machining center, we aim to upgrade the covers that we offer. Furthermore, the machine tools industry is currently grappling with environmental concerns, particularly the significant oil consumption associated with machine operation. Our developed processing system, MQL (Minimum Quantity Lubrication), offers a potential solution to this issue. Thus, we envision the environmental sector as a promising area of focus for our future endeavors. Moreover, by upgrading our hydraulic and pneumatic systems, we may establish deeper connections within the defense and aerospace industries.
Reflecting on my previous experience in Japan as an electrical and production engineer, I collaborated with clients in the Japanese aerospace and defense markets. During that time, I witnessed the challenges in machining tools, specifically the need to increase machine capacity and performance while minimizing resource consumption, including cooling and cutting oils. Your portfolio, featuring innovations like trimming MQL and streaming MQL, holds the potential to address these challenges for customers seeking higher capabilities while maintaining eco-friendliness. As you rightly mentioned, aerospace and defense represent a significant expansion opportunity for your company. Could you elaborate on how your portfolio effectively addresses these specific customer challenges?
At one of the Korean steel company, there is a critical process involving the compression of copperplates to achieve thinner dimensions. Europe and Japan have technologies that can produce remarkably thin copperplates, which they initially lacked. Several years ago, they dedicated substantial effort and time to develop the technology required to process exceptionally thin copperplates. Although they successfully developed and tested the technology, securing sufficient investment proved challenging at the time. Currently, they are revisiting this technology with our application of MQL, making substantial investments in its development. Additionally, we have implemented the Abaqus program for pre-analysis and simulation, empowering our engineers to further refine specialized MQL applications and covers.
Hansung GT, founded in 1984, has been a part of the growth and development of the Korean economy and industry, navigating various challenges along the way. Could you share the company's history and highlight the key milestones that have led to your strong R&D and market positioning today?
Primarily, I prioritize a sense of accomplishment over monetary gains. Over the long term, I've fostered collaborations with overseas companies in Europe, particularly in Switzerland and Germany, to acquire valuable know-how. With these experiences as our foundation, we are now heavily investing in self-development. European products have consistently been regarded as among the best globally. To sell European products, we had to transfer technology and share know-how, which significantly contributed to our business growth. Even today, our foremost strength remains our commitment to quality.
Furthermore, we place a high value on our employees. In the 1980s in Korea, it was common for women to leave the workforce upon marriage. However, we never adopted this practice within our company. Many of our colleagues have remained with us for several decades, and I believe this continuity is a key factor in our market success. In the past, European countries, especially Germany, used to dominate the domestic market. Over the past 40 years, Hansung GT has built relationships with virtually every machinery company in South Korea, establishing a strong presence in the domestic market.
A significant milestone in the hydraulic/pneumatic industry was our pioneering transition from rubber (NBR) and urethane sealings, which were prevalent, to solid (PKV) sealings. Solid sealing is a highly efficient hydraulic/pneumatic system due to its low friction index. This innovation allowed us to lead the domestic market, and today, our sealing engineering are integrated into heavy equipment worldwide.
You've emphasized the importance of partnerships with Swiss brands for knowledge transfer. As you explore diversification into new segments, are you actively seeking partnerships, such as distributors or technical collaborations?
Yes, indeed, we are actively seeking partnerships. We are currently working on entering the Indian market in collaboration with a local partner. Additionally, we are researching opportunities in the Italian market through a partner. While our initial attempt to enter the U.S. market via the IMTS exhibition was thwarted by the Covid-19 outbreak, we plan to make another attempt. Before venturing into the U.S. market, we utilized the Indian market as a testing ground. This decision was based on the fact that labor costs in India are ten times lower than those in Korea. We aimed to assess the competitiveness of our machines in this market, identifying whether price or quality should be our primary focus. The outcome revealed that our product quality ranks among the top-tier offerings in the market.
You are exporting your products to Japan and starting to establish a presence in the United States, along with selected European countries. As you contemplate future international expansion, which global markets are you particularly interested in, and where do you believe your company has the greatest growth potential?
Our ultimate goal is to penetrate the European market, with a special emphasis on Germany. In the realm of machine tools, Germany stands as a powerhouse, followed closely by China, Japan, and Italy. Candidly, we acknowledge that our technologies need further development to enter this highly competitive European market successfully. While we have received offers from European companies for joint ventures, we opted to decline these opportunities because we believe we require additional time to amass the expertise necessary to thrive in this challenging landscape.
You have meticulously built Hansung GT from the ground up, with your own hands, to its current stature. As your tenure as president draws to a close, reflecting on the past, what accomplishment are you proudest of?
The most invaluable asset within our company is our people—our dedicated employees. They placed their trust in me and have remained steadfastly by my side for many decades. Notably, a few years ago, a competitor attempted to lure my employees away with significantly higher salaries, but none of our team members accepted the offers. Their unwavering loyalty fills me with immense pride. Even today, their trust in the company remains rock-solid. This is the most precious value I have attained throughout my journey.
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