Daehan invests on automation for hydraulic fittings production

In recent times, due to an increasingly saturated and competitive domestic landscape, it has become essential for enterprises to think globally to continue their growth trajectories. How can Korean companies compete against Japanese and German superpowers? What is the role of Korean companies on the global stage?

I wholeheartedly agree that Korea finds itself situated between advanced economies and emerging powers. However, our competitiveness is anchored in productivity and quality control. While we have already surpassed Germany in terms of quality control, we have yet to match Japan's standards. Nevertheless, it's noteworthy that Korean quality control now rivals that of Japan and Germany, renowned for their excellence worldwide. Initially, we might face challenges competing with Japanese or German counterparts on cost, but ultimately, clients prioritize not only high quality but also productivity.

Our assertion that our quality surpasses Germany's stems from the fact that over the past few decades, Germany has heavily invested in manufacturing bases in China and procured numerous products from Italy. Compared to products from Italy or China, our quality stands out significantly. This is why we assert that our quality has surpassed that of Germany.

Since the economic conflict between China and the United States, ongoing since 2018-2019, we have witnessed major corporations reorganizing their supply chains and bringing production back onshore. As a partner to both the US/Europe and China, what opportunities does this global realignment create for Korean companies?

We're witnessing an inflection point stemming from the onset of the COVID-19 outbreak. Prior to this, the US imported 30-40% of its total consumer goods from China. However, logistical challenges, supply-demand mismatches, and Chinese government-mandated operational shutdowns have led to supply disruptions for the US. Consequently, the US is now turning to its allies, including Korea, Japan, and Taiwan. From the US perspective, while sourcing products from Mexico or Latin America may offer lower costs, political instability in those regions is a concern. Japanese products are costly, and European Union products lack the diversity to meet US market needs adequately. Hence, the US administration is increasingly focusing on the Korean logistic channel, presenting Korea with significant opportunities.

In recent years, Korean conglomerates like Hyundai, Samsung, and LG primarily sourced raw materials from China, Vietnam, or Indonesia. However, there's been a shift towards domestic complexes like Pyeongtaek’s newly constructed industrial complex. Korea's unrivaled quality and productivity are driving this shift. While conglomerates could source raw materials from developing countries, they are increasingly focusing on producing finished goods in Korea by procuring materials and components from Korean SMEs.

Korean SMEs are partnering with conglomerates like Samsung and Hyundai, which provide robust support systems for their partners. Investments by Samsung and LG in smart factory technology and advanced automation are bolstering SMEs, including our company, as part of this partnership.

One limitation for SMEs like ours is the lingering perception among conglomerates that goods from Japan, Germany, or the US are superior. However, this perception is gradually evolving, especially considering the unparalleled technological prowess of Korean SMEs like BMT or SNT in providing goods for national defense.

We've been supplying products to the US aviation market and companies like Komatsu, Hitachi, and Caterpillar. However, there's potential for further activation. Increased marketing and promotion of our products can facilitate growth. Additionally, while John Deere has recognized our excellent quality through their distributors in America, we have encountered challenges in meeting their specific requirements.

From your perspective, how will the hydraulic fitting industry evolve with these trends? What application will be the main sector for growth in the future?

Hydraulic fitting products have enduring relevance. I'm confident in the sustained growth of our company, especially considering recent developments such as electric vehicles (EVs) and electric excavators. These innovations require rare earth materials or alternative raw materials. Over the next five to seven years, the biggest challenge globally will likely be material procurement. This challenge, however, presents an opportunity for our company's sustained growth. Moreover, once companies secure the necessary materials, they will ramp up EV and electric excavator production. Currently, electric excavators weigh around one ton due to battery size limitations and costly maintenance. Therefore, demand for our products will remain constant.

Additionally, though unfortunate, any potential conflicts or wars would likely increase demand for our equipment. Looking ahead, my concern lies not with our product lineups but with technology. Achieving miniaturization, lightweight construction, and compactness in our products will be key challenges for the future. Addressing these challenges will ensure our continued success and relevance in the evolving hydraulic fitting industry.

Smart factory and advanced automation are important technologies within the fitting industry to improve production yield and quality. How are you leveraging those technologies to remain competitive today?

Firstly, emerging technologies are crucial, particularly considering the rising demand for higher pressure resistance in hydrogen cars, which need to withstand pressures above 1000 bar. Currently, these cars can only endure up to 420 bar, necessitating significant strengthening. Achieving high pressure while maintaining safety is paramount. To ensure safety, we must develop new materials as carbon steel, our current material, cannot handle high pressures without compromising safety. Thus, our focus is on material development. The US has already developed products capable of withstanding high pressures without sacrificing safety, as witnessed by JDM Steel's recent development.

While some of our competitors focus on stainless steel, it differs from our emphasis on carbon steel. Now, regarding our technology, our competitiveness rests on three key factors. First is productivity and automation. Increased productivity is essential for achieving automation, making productivity enhancement our top priority. We're pioneers in adopting robots in our assembly lines and plan to introduce 39 robot lines by 2027. Second is material development, where we're continuously experimenting with various materials to find the best fit. Third is HMLV (high-mix, low-volume) production, allowing us to manufacture multiple products in low volumes from our smart factories. With 3500 product types, all highly customized, we offer tailored solutions for every client's needs, ensuring their satisfaction.

DaeHan’s representative product line-up

DaeHan’s representative product

DaeHan’s machining process site

DaeHan’s first factory and headquarters

Previous Next

Could you describe in your own words the history of your company and what have been the challenges and most exciting successes you've had to become who you are today?

Our journey began in 1990 as an automobile components manufacturer with just three personnel. Three years later, we ventured into the hydraulic fitting business. In 2004, we secured our first export deal with Bridgestone in Japan, initially receiving monthly orders worth 10 million KRW. Bridgestone had 87 suppliers at the time, and we were ranked 87th in terms of transaction volume. However, our ascent within Bridgestone was rapid. Within three years, we climbed from 87th to fifth place, and within five years, we claimed the top spot. Maintaining our position as the top supplier for over 20 years, we received the Best Supplier Award in 2020, marking the first time a foreign company achieved this honor. That same year, we were also honored with the Korean Industrial Service Medal. Subsequently, we embarked on establishing our smart factories. Our business philosophy centers on earning our clients' trust. Much like popular restaurants thrive through word of mouth, our clients advocate for us based on our quality, performance, and timely delivery. Through their endorsements, we've expanded our reach to 10 countries.

You mentioned the importance of winning the confidence of your clients. I want to take you back to 2004 when we started surveying the Japanese market. Japanese companies are renowned for being conservative. What do you believe are the key competitive advantages within your company's DNA that allowed you to secure Japanese clients ahead of Japanese competitors?

The biggest competitive edge lies in quality and cost-effectiveness, as well as being faithful and meeting delivery deadlines. For example, if there's any reported failure by a client, our personnel flew to Japan in person on that same day and fixed the problem. Such experiences of our partners with Daehan were accumulated to forge a strong relationship, which enabled us to maintain our first rank for the last two decades.

You just explained three capabilities that helped you build 20 years of relationships with clients. Looking ahead, you aim to achieve $165 million in exports. Among the different industries today, where do you want to focus your efforts? Which business sectors do you think you can develop?

Firstly, we are aiming to capitalize on the trend of miniaturization in heavy-duty vehicles. Even heavy-duty vehicles are becoming lighter, so we are adapting to meet their specifications. As I mentioned earlier, our business philosophy revolves around earning our clients' trust. Additionally, our business management approach includes knowledge management. This means that we are supporting our employees in pursuing graduate education so they can better contribute to the company's growth. We believe that human resources will play a crucial role in our future endeavors.

In your case, two things stood out: your testing capabilities, mainly through vision inspection and 3D simulations, as well as your proprietary bending technology to replace welding, providing a more customized solution. Could you discuss your proprietary technology in manufacturing and testing, which allows you to guarantee quality and advance the technical specifications of your solutions?

Our testing procedures significantly reduce the chance of failure or defects by integrating both theoretical and practical tests. For practical testing, we model 3D simulations to ensure processability. Once confirmed, we select materials suitable for the model, create drawings, and proceed with production. After production, we conduct impulse and burst tests, mandatory worldwide. Additionally, we employ theoretical tests such as finite element analysis to determine the point at which an issue may arise under normal pressure after numerous cycles. Thanks to these analyses, we encounter no issues during mass production.

Based on all the research and development you've conducted or on all the customizations that have led to 3500 products, which of your newest products are you most proud of, and which one do you think will drive growth within your company?

We developed 343 products in Canada using our proprietary technology. One of these items is up to one inch in size, but we've also completed our R&D for two-inch products. Typically, the traditional method involves creating six angles and brazing them, but this product doesn't require those processes. It's a monotype, made in one piece because we don't use welding.

As an example, in the case of our project in Canada, this product is installed in the exhaust system of heavy machineries. Previously, it was large in size and couldn't endure the pressure, so we made it thicker to handle the pressure. By increasing thickness while using lighter materials, we've achieved a balance between functionality and cost.

Looking ahead, what new technology are you working on to improve this product? How do you anticipate its evolution and how do you plan to expand your portfolio?

It all comes down to materials and bending. Typically, STS material is used for welded types for bending. However, we use carbon steel, which has its limitations. If we switch to alloys, it will enhance durability. Therefore, developing alloys would represent a new technology for us.

We discussed how you achieved $165 million in international sales from 2004 to 2023. I'd like to hear your perspective on the growth of your company in the next two to three years.

Currently, there are geopolitical risks stemming from the Russian-Ukrainian war and the crisis in the Middle East. Once these conflicts are resolved, we anticipate a significant increase in orders for heavy-duty vehicles. Therefore, we are preparing for this surge, including plans to construct a new factory. Additionally, we mentioned that we currently offer 3500 items. We aim to expand this number to 4500, aggressively diversifying the types of items to further meet the needs of our clients. While many of our competitors are moving away from HMLV (high-mix, low-volume) production, we are embracing it even more. This is in addition to implementing smart factory initiatives and advanced automation, including the integration of robots into our production lines.

You mentioned that one key factor for your growth would be the rebuilding of war-torn areas. Regarding internationalization, you've already made significant strides, exporting to more than 10 countries. How do you envision your international strategy evolving in terms of geography and diversification of your portfolio?

While we're not an OEM, we anticipate benefiting from the trickle-down effect of Japanese companies supporting post-war construction in Ukraine. Our four largest Japanese clients contribute significantly to our export and sales, ensuring sustained growth for our company.

Moving forward, our primary focus will be on the US and European markets. However, as they are relatively new territories for us, we're still in the experimental phase. As part of our efforts, we attended the Hannover Messe exhibition in Europe last year, and this year, we're pleased to announce our booth there. Additionally, last year, we participated in a Manufacturing World exhibition thanks to KOTRA. Through their local branch, we're actively working to establish a presence overseas. Furthermore, in Japan, we're reaching out to general agencies for direct sales.

Looking ahead 10-20 years to the 40th or 50th anniversary of your company, what key milestones have you set from a management standpoint? What role do you envision Daehan playing within the global supply chain?

When I established my company, I had three primary corporate ambitions. First, to have our own factory; second, to establish our own brand; and third, to achieve debt-free management. Unfortunately, we haven't realized debt-free management yet, as we are still making investments. However, by achieving debt-free management, I hope that we can reduce interest costs while maximizing profits, ultimately enhancing the quality of life for our employees. Our aim is to share the profits or the overall success of our company with our employees, which I believe will be realized through process improvement initiatives.

Regarding your second question, since we possess the capability and processes for design-to-manufacturing, I envision us becoming a company capable of meeting the diverse needs and demands of our clients, whatever they may be.

For more details, explore their website at http://www.daehanfitting.com/front/phtml/index.php