In the ever-evolving landscape of global manufacturing, THiRA UTECH, a South Korean company founded in 2006, stands as a beacon of innovation and efficiency. Specializing in end-to-end solutions for factory automation, THiRA UTECH has established itself as a key player in various industries, including displays, semiconductors, secondary batteries, and automotive. In this exclusive interview, the CEO of THiRA UTECH discusses the company's journey, its role in empowering Korean SMEs with digital tools, and the exciting growth prospects in the manufacturing sector, both in South Korea and on the international stage. Join us as we delve into the strategies, partnerships, and visions that are propelling THiRA UTECH towards a dynamic and prosperous future.
Over the last few years, the South Korean industry has lived through a series of supply-chain disruptions, including shortages caused by the COVID-19 pandemic. As a result, the Korean government and industry made the creation of a resilient domestic supply chain a national priority. From a macroscopic perspective, what is your assessment of the strengths of the South Korean industry?
Firstly, a major advantage that South Korea currently enjoys is its geographical position. For instance, we have the capability to source advanced ma terials and components from Japan, while also procuring cost-competitive items from China. This situation fosters healthy competition among major players such as Samsung, LG, and their subsidiaries, as they strive to provide superior offerings at competitive prices. Therefore, South Korea maintains a balance of technological prowess and price competitiveness. This combination strengthens our supply chain, making it more competitive on the international stage compared to other nations.
As the South Korean industry continues to grow into a key global player in critical fields, critics claim that the country’s large corporate groups have become so big and diversified that they are blocking the appearance of a strong SME sector. Do you agree with that argument?
In my perspective, the relationship between Conglomerates and small-to-medium enterprises (SMEs) can be likened to an ecosystem. For instance, a significant portion, say about 70 percent, of SMEs rely heavily on industry giants like Samsung or Hyundai. In essence, these SMEs operate under the umbrella of the larger entities. And also SMEs are subordinated conglomerate’s industry value-chain and it is the Korean industry structure character.
This interplay translates to a situation where when large firms enjoy high profits, SMEs in turn manage to scrape off a modest profit margin. As a result of this dynamic, the competitiveness of Korean SMEs may not be on par with that of their counterparts in countries like Taiwan, Japan, or Germany.
However, this structure isn't entirely disadvantageous. It essentially prompts the SMEs to broaden their partner base. They aren't only partnering with the major Korean firms but are also collaborating with companies beyond national boundaries. For instance, a company that supplies automotive parts to Hyundai Motors could also consider collaborating with international companies like Tesla, as part of their survival strategy in this competitive industry.
While these smaller SMEs might operate on thinner profit margins due to their close association with the industry leaders, they also find an opportunity to thrive in a relatively stable environment. Their growth, though it might be at a slower pace, is still assured under this framework. This aspect does appear to be quite beneficial in its own right.
As Korean SMEs expand internationally and attempt to diversify their client base, what challenges and opportunities do they face?
One of the key challenges confronting Korean SMEs is their limited brand recognition. This is mainly because these SMEs typically don't sell finished goods to international markets; instead, they provide parts or intermediate products for assembly lines. Consequently, they find it challenging to penetrate international markets due to their low brand awareness and relatively short reference list.
Moreover, to truly excel in the global market, SMEs need to have robust core competencies in research & development (R&D) and marketing. However, these capacities often fall short, thereby creating a considerable gap between these SMEs and larger corporations(conglomerates). Hence, for SMEs to succeed on the global stage, they need to enhance their competitiveness in areas such as R&D and marketing.
However, as the baby boomer generation (born in 1955 ~ 1974, after Korean war) moves into retirement, a new wave of leaders(such as 2nd or 3rd generation leaders) who have studied overseas is stepping up to take the reins. These next-generation leaders are not only willing but also enthusiastic about breaking into the global market, viewing it as an opportunity rather than a risk. This shift could potentially pave the way for more Korean businesses to venture internationally. For instance, our partner company, CTR, is experiencing a similar transition for innovation. The upcoming leaders there are leveraging their global perspective to guide the company's expansion into international markets.
About a month ago, President Yoon met with President Biden in the United States. A significant part of their discussion centered around the 'No China Policy' and President Biden's open invitation for Korean companies to integrate into the American supply chain. What opportunities does this geopolitical scenario present for Korean businesses looking to expand into the U.S.?
The ongoing political situation between China and Korea is providing benefits to certain sectors, but not all are experiencing this advantage. For instance, the energy sector, particularly areas such as solar energy and secondary batteries, is reaping significant benefits. This is mainly due to Korean companies, like Hyundai Motors, establishing their plants in the US. Furthermore, any sector linked to EVs is clearly benefiting from this circumstance.
However, the picture is less clear in the semiconductor industry. This uncertainty is due to China being a major semiconductor client who represents one of highest demands in the world.
Given the increased political tension, Korea finds itself in a delicate situation, as if walking on eggshells. In the commodity market, sectors like cosmetics are facing a significant downturn. Thus, the extent of impact from the US-China tension varies across different industries.
Based on research I conducted with my clients, it's evident that the secondary battery industry and solar energy, particularly solar panels, are the sectors making the most of this geopolitical situation.
How do you foresee the evolution of the manufacturing sector in the coming 12 to 18 months?
The current state of the manufacturing sector in Korea presents a mixed picture. Certain industries are experiencing sluggish performance, whereas sectors like EVs and secondary batteries are projected to sustain growth until 2025. This is evident in the surge of new factories currently under construction to accommodate increasing demands, pointing towards a polarization in industrialization.
In this environment, some sectors are facing a downturn, while others are flourishing. Take the semiconductor industry for example, where Korea primarily produces memory semiconductors. Forecasts suggest that the memory semiconductor industry will remain slow until the first half of the following year, leading to a pause in new investments.
On the other hand, investments are being channeled towards areas such as solar energy, and companies such as LG Energy Solution, Samsung SDI, and Ecopro expect significant growth. However, corporations like Hynix and Samsung are still exercising caution when it comes to investment decisions.
Founded in 2006, THiRA UTECH offers end-to-end solutions for factory automation. Furthermore, the company collaborates with an impressive list of companies, including LG, SK Hynix and Samsung. Could you take us through the journey of your inception and your growth trajectory thus far?
Our company was founded in 2006, and I took ownership in 2008. My background is rooted in semiconductor software engineering, so essentially, industry insiders spearheaded the creation of our company.
As we approached the end of the first decade of the 2000s, the fervor for the LCD and OLED industries started to wane. Concurrently, the solar energy sector began to gain traction, aligning with the timeline when secondary battery companies like SK Inovation started seeking partnerships with high-tech firms like ours. Their goal was to tap into our deep understanding of manufacturing processes to enhance production efficiency.
This trend paved the way for us to establish strong partnerships with giants like Samsung and LG. At the time, our advanced technological capabilities provided us with a relatively lower barrier to entry in this niche. This strategic position enabled us to form alliances with major players in the industry.
Our clients' main focus was to maintain minimum inventory while enhancing efficiency in their production planning. We succeeded in providing solutions that helped them achieve these efficiency levels consistently. Following several fruitful years of partnerships with household names, companies like Hanwha started seeking our expertise for novel solutions.
Your company has a footprint in a broad range of sectors, including displays and semiconductors, secondary batteries, automotive, and there are plans to venture into logistics soon. Which industry do you consider as your primary market? Additionally, which among these sectors do you foresee as offering the most significant growth potential in the upcoming years?
Our primary focus lies in the sectors of rechargeable batteries and EVs, which are downstream industries necessitating large-scale production facilities. I see immense growth potential in the secondary battery industry for the future.
Traditionally, automotive manufacturing predominantly involved assembly lines and conveyor belts. However, we're now witnessing a shift in production methods, mirroring the diversification seen in household appliances. The production of diverse EV lineups reflects this change.
From a more specific viewpoint, our principal target is the rechargeable battery market(secondary battery). But when considering the bigger picture, the scope extends to include electric vehicles as well.
Your company provides an extensive suite of automation solution that aim to streamline operations, improve efficiency, and foster success at different phases of the manufacturing process. Could you guide us through your portfolio of solutions?
Our solutions are primarily built around three major pillars. The first one is Thira SCM, a solution geared towards production planning. For instance, if Samsung plans to produce smartphones in their global factories, we devise an optimal production plan for their facilities in Korea, India, and China. Our software provides precise guidelines for factory workers, indicating how many smartphones need to be produced within a given timeframe, say three days.
The second pillar is the MES, or Manufacturing Execution System, and the third revolves around automation software, which facilitates automated and unmanned operations in the manufacturing line.
These three pillars form the core of the solutions we offer to our clients. In addition, we're also developing AMRs (Autonomous Mobile Robots) as well as various components, such as actuators.
We started our journey as a software design engineering company and eventually expanded into integrating hardware for our customers.
You've pointed out that EVs and secondary batteries are likely to be the sectors with the highest growth potential. Where do you see your services adding the most value within these two sectors?
Our entire range of solutions is utilized broadly across industries. For instance, LG Energysolutions employs our Supply Chain Management (SCM) solutions company-wide, and we offer our Manufacturing Execution System (MES) solutions to SK On and Ecopro. Meanwhile, Samsung SDI and SK On make use of our autonomation software. Essentially, our three key solutions are versatile and can be applied across all sectors.
You recently entered into a joint venture with CTR to accelerate digital transformation within the manufacturing sector. Could you shed light on the unique value proposition that you bring to this partnership?
CTR, our partner, excels in the field of automobile parts, while we specialize more in high-tech domains such as semiconductors and secondary batteries. This synergy forms the basis for our joint venture as we can complement each other's strengths when venturing into the automotive and mobility industry.
CTR has four affiliates. As part of our current operations, we're seeking to bolster our software capabilities by encouraging these affiliate companies to use our software. Once everything is set, we also aim to extend our reach to overseas markets, aligning with our future strategy.
How do your services empower Korean SMEs to use digital tools, such as AI and cloud computing?
Regarding AI and cloud computing, Korean SMEs currently lack a systematic infrastructure. Contrary to their American counterparts, the Korean manufacturing industry hasn't fully transitioned to cloud-based operations, which puts us still in the initial stages. To overcome this, we recently collaborated with Microsoft Korea to leverage their expertise in cloud services and their innovation lab as an agreement was signed between Microsoft Korea and CTR Group, and work is underway to prepare for the cloudization of smart factories and the application of AI technology through Formation Labs, a JV between THiRA-UTECH and CTR.
Over the last 6 month, THiRA UTECH’s share price more than doubled, jumping from 7,000 KRW in January 2023 to more than 16,000 KRW in June. How do explain this incredible performance?
In my view, the escalating tensions between the U.S. and China, along with greater need for automated solutions, create new opportunities for us. We've managed to secure numerous clients in the rechargeable battery(secondary battery) industry, We also plan to form an American corporation and to start operating the Georgia subsidiary around the end of September or October.
Prominent players like Hyundai, GM, and Ford are increasingly shifting their focus towards EVs and are likely to produce in-house rechargeable batteries for these EVs. Given that the growth of EVs and rechargeable batteries are intrinsically linked, our objective extends beyond just offering software. We aim to provide comprehensive solutions encompassing AI and automated hardware.
What countries or regions do you see highest growth potential into?
China's manufacturing dominance stems from its remarkable price competitiveness. While we previously operated in China, we had to withdraw due to our inability to compete on price. However, the current efforts by the U.S. to relocate the supply chain to American soil present a significant advantage for us. The production costs in the U.S. are already high, creating a more favorable environment for us to manufacture value-added products. Prior to the Covid-19 pandemic, our primary focus was on the Chinese and Vietnamese markets. Nevertheless, the landscape is evolving, and new opportunities are emerging.
If we were to conduct another interview five years from now, could you share a dream or ambition that you would like to have achieved by then?
My vision is to establish ourselves as a global software service provider, catering not only to renowned Korean conglomerates such as Samsung and LG but also expanding our reach internationally. I aspire to make significant strides in the American market, forging collaborations with prominent corporations and establishing our presence on a global scale.
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