AHA Company, a multifaceted player in the tech industry, is poised for a transformational shift. With four specialized research institutes, they are strategically uniting their expertise under a single R&D center in the bustling heart of Seoul, aiming to tap into top-tier talent. While encompassing three distinct business divisions, their strategic focus remains clear, driven by the burgeoning potential of the EV charger sector, they aim to contribute to the betterment of humanity.
With its advanced digital infrastructure and dominance in key industrial sectors, South Korea is hailed as one of the most innovative countries in the world. In recent years however, the South Korean economy has lived through a series of supply-chain disruptions, including shortages caused by the COVID-19 pandemic and trade fictions with regional countries. From a macroscopic perspective, what strengths should the South Korean industry develop to attain a more advanced global position? Additionally, how pivotal is the establishment and growth of SMEs within the Korean industry?
Many of the bottlenecks created by the COVID-19 pandemic have been addressed in recent times, and we are now gradually returning to a state of normalcy. South Korea has shifted from being a labor-intensive market to focusing on the production of design and technology-based products, while sourcing components and materials from China. While we excel in creating these intermediary products, the escalating labor costs in China and the evolving trade dynamics between the U.S. and China present formidable challenges for us.
In terms of IT technology, we may have an edge over the U.S. in certain aspects. Nevertheless, it is important to acknowledge that the U.S. holds the global leadership position in the field of IT, while South Korea tends to concentrate its efforts on specific sectors within the IT industry. This capacity gap poses ongoing challenges for Korean SMEs seeking to expand globally. Nevertheless, I am confident that the future holds promising opportunities for us.
Additionally, a major hindrance to the growth of Korean SMEs and startups has historically been related to investment issues. Previously, the "one vote per one general stakeholder" policy limited our ability to attract the level of investment necessary for SMEs to thrive, often leading to unsolicited mergers and acquisitions by conglomerates. However, a significant development occurred last year when the National Assembly passed a law allowing for multiple voting rights. This change is expected to provide a solid foundation for securing ample investments, potentially propelling SMEs towards limitless growth and a more prominent global presence. We firmly believe that this will greatly enhance the capacity of Korean SMEs to expand their global footprint.
You mentioned that there were concerns in the past about large conglomerates acquiring SMEs through mergers and acquisitions, and this is one of the criticisms that South Korea has received. These major corporate groups have grown so vast and diversified that they sometimes hinder the development of a robust SME sector. Journalists often point out that while Korean SMEs have a successful track record in serving domestic conglomerates, they encounter difficulties in attracting international clients. First, do you agree with this argument? Second, since your company serves as a prime example of a truly international player, how did you achieve this? What characteristics do you think enabled AHA to establish a global presence?
I partially agree with this argument, but I respectfully disagree with the other part. SMEs affiliated with conglomerates may indeed need to rely on these conglomerates as a path forward. Unfortunately, some M&A incidents have resulted in SMEs either being merged into larger entities or going out of business. However, certain SMEs have astutely found their way into the global market. Nowadays, various platforms are reducing the dependency of SMEs on these large Korean companies.
Throughout my three-decade career in this field, I have developed four groundbreaking products that were the first of their kind globally. One notable example is the LCD electronic whiteboard known as "IFPD." While LCD projectors were used for whiteboards in other parts of the world, I pioneered this innovative product in 2007. It gained recognition worldwide, necessitating my travels to all corners of the globe. Initially, we began exporting the electronic whiteboard to 63 countries. However, five years later, Chinese competitors replicated the product and offered it at half the price, presenting significant challenges in retaining buyer interest. Geographically speaking, I believe there are inherent limitations for Korean SMEs when competing with China. If I had introduced this innovative technology to China around 2007, I might have gone from rags to riches.
Though the nature of products may vary, designing this electronic whiteboard is relatively straightforward. Consequently, it's challenging to assert exclusive rights over the product against Chinese competitors, despite holding 200 patents for this display. Thus, we chose not to pursue a patent case in court. Instead, we are primarily focused on differentiating our products from Chinese counterparts.
While the potential remains significant, and the market has expanded, we believe it's essential to diversify our product portfolio, given the challenges we faced with our Chinese competitors. I believe that most Korean SMEs encounter similar obstacles. Compared to the IT industry, Korea's manufacturing SMEs may face a less optimistic outlook in the future.
One of your primary sectors is edutech, and when examining the edutech field, digital technology plays a transformative role. For instance, we see an increasing integration of AR and VR technologies into classrooms, fostering collaboration and interaction among students. Furthermore, AI is gaining prominence in education for enhanced data analysis and more. Looking ahead, how do you envision the evolution of education over the next decade? Additionally, what is AHA's strategic plan to adapt to these market developments?
In South Korea, we are currently experiencing a significant demographic shift characterized by a low fertility rate, with concerns even emerging about the potential extinction of rural regions. In this context, online education technologies are poised to offer a valuable platform for educating students residing in rural areas. By harnessing AR and VR technology, education will increasingly rely on these technologies as the way forward.
Comparatively, some populous countries do not grapple with these demographic challenges. However, even in China, schools in rural areas are already incorporating VR and AR technologies into their classrooms. Thus, as we look ahead, it's evident that online technologies are already being deployed for underserved populations, while general education will continue to advance in line with the trends advocated by young people. This will involve the utilization of AR, VR, and AI technologies. For instance, consider the case of Jeollanam-do Province, which had 1.8 million students 20 years ago. Now, that number has rapidly declined to 180,000. Moreover, as someone in my sixties, I recall that around my generation, 1.1 million children were born each year. However, this figure has dramatically dropped to 260,000 as of this year, underscoring the pressing issue of a significantly low fertility rate and the potential extinction of rural regions.
In addition to these demographic challenges, there are also external risks and issues to contend with, such as supply chain disruptions and trade disputes involving the U.S., China, and neighboring emerging nations. Domestically, we grapple with the profound impact of a low fertility rate. Many young people are increasingly avoiding jobs in labor-intensive industries that are being partially replaced by immigrant laborers. These immigrant laborers often demand wage levels equivalent to those of Korean workers. When an economy stalls after a significant development, labor costs should ideally remain stable or even decrease to align with economic progress. However, Korean labor costs have continuously risen, now exceeding those of Japan by 30% and doubling those of Taiwan, despite our GDP being smaller than theirs. These challenges weigh heavily on Korean SMEs, making it challenging for them to stay competitive. While conglomerates may maintain competitiveness through overseas plants, factories, and local SME affiliates, SMEs often lack this level of capacity. As part of our efforts to address these challenges, we established a plant in Japan in 2017, particularly in the burgeoning electronic whiteboard market.
In addition to the existing challenges, the South Korean industry faces another significant hurdle in the form of increased government pressure to transition towards a carbon-neutral economic model. To attain this goal, Korean industrial players are investing substantial amounts of money in carbon-neutral initiatives. How does AHA navigate this situation, and what technological advancements are you pursuing to reach these carbon-neutral objectives?
While some of our core products may pose challenges in achieving carbon neutrality, our EV infrastructure development falls under the ESG category, making it eligible for government incentives. Moreover, we are taking proactive steps within our enterprise. For instance, we have recently established an office in Seoul equipped with solar panels on the roof, demonstrating our commitment to sustainability. However, I believe that, in general, it remains a formidable task for SMEs to fully meet the carbon neutrality goal.
AHA was founded in 1995 and has been a leader in the Korean edutech sector for the past 15 years. Over the last three years, you have significantly diversified your portfolio into healthcare and EV charging. Could you provide a historical overview of AHA's journey and highlight some key milestones achieved since its inception? Additionally, what is your vision for the future evolution of AHA?
First and foremost, over the past 25 years, we have achieved several significant milestones. We were pioneers in developing digital podiums and electronic whiteboards, both of which have become the cornerstones of our company's success. Our plan is to continually advance and refine these flagship products. Furthermore, the outbreak of COVID-19 has prompted us to venture into the healthcare development market. One notable innovation is the "smart pass," a contactless thermometer. We have obtained approval and licensing from the Korean Food and Drug Administration (KFDA) for this medical device. The smart pass, being contactless, eliminates the risk of transmitting diseases since it measures people's temperature without human contact. This has proven to be instrumental in curbing the spread of COVID-19.
Secondly, given South Korea's susceptibility to fine dust from China, air purifiers have become a commonplace necessity. However, with the advent of COVID-19, the demand for air sterilizers, such as PURI TOPIA, has surged. We have acquired a technology-based company specializing in air sterilizers. Conventional air purifiers can only filter particles as small as 0.3 micrometers, whereas viruses are significantly smaller, measuring just 0.001 micrometers. As a result, air purifiers are unable to effectively eliminate viruses. In contrast, air sterilizers, like PURI TOPIA, can disintegrate the molecular structures of viruses and remove hazardous substances like ammonia and benzene. Unfortunately, public awareness of our air sterilizer product remains relatively low, leading to lower sales.
Our air sterilizers are rooted in plasma technology. Dr. Chang-min Lee, director of the Healthcare Research Institute, is a world-renowned plasma expert who earned a master's and doctoral degree while studying plasma technology with researchers from Russia during graduate school. Our products have garnered attention at international exhibitions, and we recently obtained a major certificate from Japan, further confirming the global recognition of our technology. We firmly believe that air sterilizers will eventually replace traditional air purifiers, and we remain committed to advancing this technology.
Regarding our foray into the EV infrastructure, we recognize the need to tap into a new growth avenue aligned with current mega-trends and our competitive advantage. This led us to acquire a technology-rich company to kickstart this business. We have successfully completed product development and are currently in the process of obtaining certifications from around the world. By the end of this year, we will unveil our marketing strategies and launch this exciting venture.
You have a substantial R&D center encompassing three distinct sectors, each requiring unique engineering and manufacturing skills. How do you plan to seamlessly integrate and leverage the strengths of these sectors for maximum synergy in your future development?
We operate four research institutes. The first focuses on electronic boards, the second on healthcare, the third on EV chargers, and the fourth is a design-dedicated research institute capable of supporting all three sectors. Our plan is to consolidate all four research institutes into a single R&D center, which will be established in Seoul. This strategic location in Seoul offers advantages for attracting top-tier talent. Although we are a single company, we have three business divisions, each with a distinct role to play. Our approach will prioritize balanced growth across all three divisions, but our primary focus will be on the EV charger sector due to its immense potential.
In the realm of EV chargers, quality and cost are paramount. Our clients are EV charging station operators, and their choice of chargers hinges on quality and cost, not fancy designs. It's analogous to gas station pumps; consumers seek stations with low gas prices rather than expensive or stylish pumps. Similarly, our clients, EV charging station operators, opt for cost-competitive EV chargers to ensure profitability. If our chargers are too costly compared to other global manufacturers, we risk losing market share. Hence, our strategy entails simultaneously improving quality while reducing costs. We believe this can be achieved by leveraging our expertise and experience. Most global operators prefer non-Chinese EV chargers due to reliability concerns. Our exhibitions in the U.S. and Germany have garnered positive responses from clients who expressed willingness to choose Korean-made chargers if they meet cost requirements. To realize our objectives, we believe it's crucial to locally produce core components in Korea while sourcing cases or packaging from China to align with the cost structure of Chinese competitors.
One notable risk in this industry is the tendency to commercialize EV chargers after designing and testing on vehicles only, without thorough inspections. Consequently, approximately half of the chargers already on the market are prone to malfunction and breakdowns due to inadequate testing. To address this, we have invested approximately $2 million (or 2 billion KRW) to develop an inspection device, scheduled for completion by the end of November this year. This device will facilitate 37 automatic tests, ensuring that only fully verified chargers are released to the market. We anticipate this device will not only establish us as a globally recognized inspection device company but also enable us to secure OEM partnerships. Ultimately, this approach will position us to provide the most reliable and cost-effective EV charger infrastructure, enhancing our global competitiveness. Therefore, we consider EV chargers as our core competency for the future.
When it comes to certifications, different carmakers, countries, and regions have their own unique certification and regulatory requirements. Therefore, if AHA intends to penetrate the U.S. or European markets, it must engage with carmakers while simultaneously adhering to the specific certifications of those regions. What key strategies are you implementing to enhance competitiveness and achieve the objective of becoming a highly certified company?
There are five types of charging standards: Tesla type, CCS 1, CCS 2, the Chinese type, and CHAdemo. Currently, most of these standards have become highly standardized, primarily differing only in the plug types. Consequently, we are not developing chargers exclusively dedicated to specific types, such as Tesla or CHAdemo. For reference, our chargers can also be used for Tesla types with a conversion adapter. CCS 1 is commonly employed in Korea and the U.S., whereas CCS 2 is predominantly used in Europe. We are actively working on developing a device capable of accommodating both CCS 1 and CCS 2 standards.
Several large electronics corporations have been expanding their new mobility divisions and recently revamped their EV charging device. Such companies have integrated various components into their different divisions, providing them with flexibility in adhering to diverse certifications. You mentioned your goal of creating a device compatible with all standards. How do you address this challenge, and what strategies are you employing to compete effectively against these corporate giants?
In terms of design, we adhere to global standards, following the UL certification standard for the U.S. and the IEC certification standard for European regions. Any design flaws could prevent us from selling our products in any continent, so we exercise extreme caution in this regard. However, we anticipate that, over time, EV charger standards will become more standardized. Currently, we closely monitor developments in the U.S. because many carmakers have announced their intention to shift away from CCS 1 and lean towards the Tesla type.
Over the past three years, following the COVID-19 pandemic, AHA has achieved remarkable revenue growth, with revenues surging from 30 billion to 80 billion KRW. What are the primary factors behind this impressive growth?
In 2012, we were on the path to being listed on KOSDAQ. However, due to fierce competition with Chinese contenders at the time, our revenue remained stagnant at 30 billion KRW for the subsequent decade. Throughout that period, we diligently built our potential. Finally, we launched smart pass and PURI TOPIA, which became pivotal for us during the COVID-19 pandemic. Despite expectations of a decline in sales and revenue following the pandemic, our innovative electronic devices allowed us to regain a strong foothold in the global market. This year, we are on course to achieve 100 billion KRW in revenue and secure a listing on KOSDAQ, setting the stage for exponential growth. We believe this will establish a solid financial foundation to reach 1 trillion KRW before the end of my tenure as President.
You've clearly outlined that one of your strategies to achieve 1 trillion KRW in revenue is expanding abroad. You have received various export awards, including the "20 million dollar export tower award." Additionally, you have a joint venture in China and established bases in Europe and the U.S. What will be your strategy for international expansion over the next five to ten years? Are you actively seeking partners, distributors, or considering joint ventures?
We are witnessing a shift in client preferences, with many who grew tired of Chinese buy-out strategies turning back to us. We are successfully regaining our position in the global market. I firmly believe that global expansion is imperative for Korean SMEs. To achieve this, we have already registered on Amazon in the U.S., Japan, and Germany. We are also actively exploring opportunities to expand further into online markets worldwide. Specifically, we plan to establish a corporate entity in Germany to provide a stronger foothold for EU expansion. Our corporate body in Japan is also experiencing significant growth. Moreover, we have signed a Memorandum of Agreement (MOA) with a Taiwanese LCD panel manufacturer, which used to be the third largest in the world. This suggests substantial potential in the electronic board market.
In the EV charger market, once product development and certifications are finalized, we anticipate standing out among competitors, particularly as Korean companies are currently lacking in competitiveness in EV charger development. We are on the verge of securing contracts to provide EV chargers for conglomerates.
One of our most valuable assets is our highly skilled engineers. They leverage their expertise and experience to achieve remarkable results. For instance, our engineers can complete a six-month development project in just two months. We are also collaborating with two Canadian companies to develop a Canadian type EV charger, which has been in progress for a year now. Once we obtain the UL certification, we will expand our EV charger offerings. Expanding our market share is not anticipated to be a significant challenge.
You mentioned that one of your goals during your tenure as President is to achieve 1 trillion KRW in revenue. Are there any other goals or ambitions you would like to accomplish before handing the company over to the second generation of executives?
Fundamentally, my belief has always centered around serving a greater cause for humanity. We have never manufactured products solely for amusement or certain gain; all our products contribute to the betterment of humanity. The EV charger is no exception; it aligns with current trends. I began my career as an intrapreneur when I was young, and now, as I enter my golden years, my remaining decade ahead is dedicated to making the AHA brand globally recognizable.