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BMT expects to continuously gain market share in the semiconductor industry

Interview - May 27, 2024

The Superlok brand leads in high-performance fittings and valves for the semiconductor and oil & gas industries. BMT expends its UHP solutions to systems to target the semiconductor market worldwide.

YOON JOON CHAN, CEO OF BMT CO., LTD.
YOON JOON CHAN | CEO OF BMT CO., LTD.

The success of Korean conglomerates has had a positive trickle-down effect on domestic suppliers, providing them with growth momentum and core capabilities. However, 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. In order to achieve this goal, Korean companies will need to find their place in the global supply chain. How can Korean companies compete against Japanese and German superpowers? What is the role of Korean SMEs in the global supply chain?

As you all are aware, Korean SMEs owe much of their growth trajectory to the pivotal role played by Korean conglomerates, fostering mutual growth for both SMEs and conglomerates. Nevertheless, it was the Korean SMEs that served as the bedrock for the growth of Korean conglomerates. However, this often came at the cost of SMEs, as they did not always share in the full benefits of the enterprise. Although Korean conglomerates rapidly expanded globally, there were inherent limitations for Korean companies to achieve similar global stature. I firmly believe that for Korean SMEs, global expansion is no longer an option but a necessity. The international strategies adopted by Korean SMEs will vary; some may opt to establish agencies or develop distribution channels, while others may establish corporate branches abroad.

Reflecting on the trajectory of Korean SMEs, their initial forays into the overseas market primarily targeted China. A decade ago, the majority of Korean SMEs ventured into the Chinese market, yet nearly 99% faced setbacks. These challenges stemmed from the risks associated with China, including cultural disparities, political intricacies, and differing legal systems, which diverged significantly from those in Korea. Consequently, Korean SMEs redirected their focus towards markets such as Vietnam, India, Southeast Asia, and Latin America, aiming to reduce labor costs. However, lowering labor costs alone did not suffice as a strategy for global expansion.

Instead, BMT’s primary emphasis was on understanding diverse cultures, legal frameworks, and institutions, while identifying partners possessing core competencies in operating within specific local regions. Although our establishment dates back to 1988, it was only two decades ago that we began gaining recognition on the global stage. Despite our initial focus on increasing market share domestically and aiming to become the leader in our domestic market, our corporate vision continually evolves. Our next objective is to establish ourselves as one of the BIG 3 Companies in the Instrument Fittings & Valves Sector. Our recent international strategy involves commencing factory operations in Saudi Arabia by the end of this year as part of our operational strategy. While I am unable to disclose all detailed strategic plans at this time, our corporate ambition remains steadfast: to improve continuously and become a better company tomorrow than we are today, embodying our management principle.

Regarding the second question on whether Korean SMEs are caught between advanced and emerging economies, I respectfully disagree. Although this viewpoint may be posited by some publications, I assert that Korean SMEs play an integral role worldwide, leveraging advanced technologies, cutting-edge quality, and competitive pricing. Compared to other contenders, Korean SMEs enjoy favorable brand recognition, instilling confidence in customers worldwide. I firmly believe that we possess ample reasons for pride as we embark on our global journey.


BMT Headquarters


In recent months, international governments have rolled out trade policies aimed at promoting supply-chain realignments. One of the best examples has been the Biden Administration’s Inflation Reduction Act and Chips Act, which is creating new opportunities for global manufacturing powers including Korean enterprises. You mentioned that Korea now enjoys good brand recognition. Do you believe this is an opportune time for Korea to capitalize on this global supply chain realignment?

Regarding the IRA and the Chips Act, I perceive there was a greater political impetus behind them rather than purely economic motives. These acts seemed to serve as nationalist measures for the US administration to counter China's growing hegemony and rivalry. In my view, they may not have been the most thoughtful measures for the US. I question how much benefit Korean SMEs, or SMEs outside of the US, can actually derive from these two trade policies. Korean companies must adopt a dual strategy, considering both the Chinese and US markets as their export destinations. Currently, the US administration is unilaterally imposing export bans on semiconductor core technology, affecting companies like Samsung or SK Hynix. Therefore, I'm uncertain about the extent to which we can benefit from the IRA or Chips Act, particularly in comparison to US-based companies.

 

Due to increased inventories and reduced demand stemming from monetary policy tightening, the semiconductor industry endured a significant downturn spanning five quarters during 2022-2023. However, experts anticipate a comeback for 2024. How do you envision the evolution of the semiconductor sector over the next 12 months?

It may not be appropriate for me to offer precise forecasts for the semiconductor industry's outlook. However, given that more than 50%  of our total sales originate from this sector, I closely monitor its trajectory and growth. I have keenly felt the impact of the semiconductor industry's recession over the past five consecutive quarters, directly affecting our sales. Nonetheless, I hold an optimistic view of the semiconductor industry's future, foreseeing steady growth over the next five to ten years. Despite recent challenges such as the Ukraine conflict, Middle East tensions, and heightened US-China relations, the semiconductor industry has historically thrived, particularly during the COVID-19 pandemic. Moreover, with the exponential advancement of Fourth Industrial Revolution technologies like artificial intelligence, I anticipate an astronomical surge in semiconductor demand starting from the third quarter of this year and onwards. This sentiment is reinforced by the increasing number of semiconductor plants slated for construction this year, even in regions like Germany, the UK, and France, where such facilities were previously lacking. Consequently, I foresee a significant upturn in the semiconductor industry towards the end of this year.

 

Over the last two years, we've witnessed a notable trend of semiconductor production onshoring, with companies like Samsung and SK Hynix establishing large factories in the US. Additionally, TSMC has expanded its footprint by opening foundries in both Japan and the US, while Intel is embarking on the construction of two massive foundries in the US and Europe. Ultimately, these foundries serve as end users of your products. What do you perceive as the challenges and opportunities stemming from these substantial investments in new foundries across Europe, the US, and even Japan?

I believe these investments present both risks and opportunities, particularly for Korean giants like Samsung and SK Hynix. Competitors such as Micron and TSMC are heavily investing in new foundries and fabs, posing a competitive threat. However, from our perspective as a parts, equipment, and material company, this scenario offers immense opportunities.

 

A lot is unfolding in Saudi Arabia. Aramco's IPO marked a significant development, with Saudi Arabia channeling the proceeds into the Public Investment Fund (PIF) and diversifying its economy beyond oil and gas extraction. Neom City and investments in manufacturing and downstream industries underscore this diversification effort. Simultaneously, the sector is undergoing constant change due to the Russia-Ukraine conflict and subsequent sanctions from Russia, leading to their departure from the Association of Petroleum Producing Countries. What opportunities do you foresee for your company in Saudi Arabia and the broader Middle East, both within the oil and gas sector and concerning the shift towards higher-value industries?

Reflecting on the history of Middle Eastern countries, just two or three centuries ago, they were impoverished nations with limited infrastructure. Today, they stand as formidable oil and gas players. Saudi Arabia, in particular, is embracing the global push for carbon neutrality and coal phase-out, signaling a proactive stance towards the future. Initiatives like Saudi Vision 2030, which encompasses projects like Neom City and regulatory reforms benefiting women, reflect this forward-thinking approach. While Saudi Arabia was historically characterized by closed-door policies, it now charts a path towards openness and innovation. Despite challenges such as tropical climates and desert landscapes, the establishment of infrastructure like highways proves cost-effective, leveraging abundant natural resources. Moreover, Saudi Arabia possesses significant fiscal resources to navigate through challenges, especially amidst rising petrochemical costs. Korean SMEs and conglomerates recognize this potential, hence they’re increasing presence in Saudi Arabia. It's unlikely that the petrochemical industry will undergo a sudden collapse or decline within the next five to ten years, given the ongoing demand for petrochemical products. The convergence of petrochemicals and gas industries offers synergistic opportunities, aligning with Saudi Arabia's push towards high-value-added industries.

 

The strength of BMT's portfolio lies in its versatility to meet the diverse requirements of various industries. This allows you to adapt over time in line with economic changes. Over the next 3 to 5 years, from which industries do you foresee growth for BMT?

As I mentioned, more than 50% of our total revenue comes from the semiconductor industry, which serves as our biggest revenue stream. Given the interconnected nature of shipbuilding and the oil & gas industry—from drilling to transportation to refinery—we anticipate significant growth from these sectors, along with the semiconductor industry, over the next five years.

However, our primary focus for future growth remains on the semiconductor industry, which we anticipate will experience steady expansion. We are committed to ongoing product development and client acquisition within the semiconductor sector. While Korean-based conglomerates like Samsung and SK Hynix face challenges compared to global counterparts such as TSMC or Intel, we are intensifying our efforts to establish international strategies aimed at expanding our presence in overseas market.

 

Starting with valves, fittings, and now venturing into electricity—could you share your company's history in your own words? How have you adapted and evolved over the years to serve such a diverse range of industries, including semiconductor, oil and gas, and petrochemical sectors?

Our company's evolution has been driven by a fundamental need for survival and adaptation. In today's fast-paced business environment, even the most renowned companies must evolve to remain viable. Our corporate mission centers on constant innovation to navigate the ever-changing market landscape. This ethos led us to identify industries aligned with our technological expertise and expand our product portfolio accordingly. Diversification has been crucial for our company's survival—not just across industries but also in terms of clientele. In the past, SMEs were often lauded for engaging with major corporations, but reliance on a single client poses significant risks. This lesson became evident to me in 2000, prompting us to prioritize diversification after facing similar challenges. Today, we recognize the importance of maintaining a balanced client portfolio to mitigate risks and ensure long-term sustainability.



Given the importance of reliability and new technologies in the semiconductor industry, the i-Fitting Poka Yoke system is an intriguing solution for preventing mis-assembly. What key technologies do you believe will be essential for the future, and how are you addressing the needs of the semiconductor industry today?

While a CEO's vision for their company's future may paint a rosy picture, I believe true growth momentum stems from understanding and meeting the needs of clients. Not all clients articulate their specifications or demands kindly, so it's imperative for a company to empathize with their perspective and identify areas for improvement. This mindset drove the development of our i-Fitting series, aimed at enhancing user convenience and preventing human error. Our efforts were recognized with a gold medal at INFEX in 2014, one of the world's top invention awards. We prioritize meeting diverse client needs and strive to secure a leading position in the market compared to our competitors. For instance, our cryogenic technology wasn't in high demand six to seven years ago when LNG orders were limited. However, we proactively invested in cryogenic transport technology, overcoming challenges to emerge as a leader in this field. In the modern era, I believe innovation is more about discovery than invention. Rather than creating something entirely new, it's about elevating existing materials to new heights through upgrades. This is where our core competency lies.

 

How would you define your key competitive advantages compared to competitors worldwide?

As I mentioned earlier, I believe in the significance of discovery. Integrating cutting-edge technologies into existing ones to elevate them represents our core competency. In this industry, companies often emulate their peers to enhance their offerings. However, we prioritize advancing our existing materials to create innovative products. Another cornerstone of our competitive advantage is our team, particularly myself. I take immense pride in my ingenuity and creativity, which I believe are unrivaled. Leveraging my ingenuity, I consistently strive to develop superior products compared to our competitors.

 

You've mentioned that BMT's goal is to enhance existing technologies, particularly in materials. Can you update us on the progress BMT has made in cryogenic applications? Additionally, which products do you foresee driving the company's growth momentum in the future?

When it comes to cryogenic applications, we're making strides in two key areas. Firstly, our valves are engineered to operate at ultra-low temperatures, such as those encountered with liquefied natural gas (LNG) at around -163 degrees Celsius. These extreme conditions demand optimal valve performance. Secondly, our cryogenic valves are integral for transporting LNG to vessels, particularly as the shipbuilding industry increasingly adopts eco-friendly practices. Currently, our focus within the oil and gas industry centers on cryogenic technology for eco-friendly fuel applications.



Looking ahead, we see significant growth potential in ultra-high purity (UHP) applications in the semiconductor industry.  We are investing in expanding our UHP Fittings and Valves technology to Gas Systems as well.



I'd like to delve into another synergy—while your core business revolves around valves and fittings, BMT Electronics now operates in the energy management system domain. What prompted this diversification, and what synergies do you anticipate gaining from it?

Our foray into electric and energy systems stems from a strategic imperative to sustain our competitiveness. The significance of electric and energy systems cannot be overstated, particularly as administrations worldwide aim for net zero by 2030 or 2050, seeking to reduce reliance on petrochemical energy sources. However, it's unrealistic to entirely eliminate these energy sources, as they remain essential for survival. What we truly need is efficient management of these energies. To future-proof our business, we recognized that optimizing costs in areas of energy deficit requires effective monitoring and management systems. Consequently, we've shifted our focus from solely manufacturing to efficient Energy Management Systems (EMSs)—a necessity that will only grow in significance over time.

Regarding the synergy between our Energy Management System business and our fitting and valve business, I don't perceive a direct practical synergy. The decision to diversify was primarily strategic, and it was  simply part of portfolio diversification.

 

You mentioned the importance of diversifying your client portfolio, especially given the risks associated with relying solely on transactions with a single conglomerate. Considering that the semiconductor industry and ultra-high purity are your mainstays, I'm curious about your international strategy and how you envision the internationalization of ultra-high purity and semiconductor industries over the next three to five years.

We prioritize ultra-high purity (UHP) due to our inherent strength and competitiveness within the industry. Few companies worldwide possess the level of brand recognition in UHP technology that we do. We've positioned ourselves to become one of the global UHP fittings and valves  leaders. Regarding our international strategy, our focus extends beyond merely entering local markets; we aim to identify and collaborate with proficient partners possessing operational capabilities specific to each country. These partners must adeptly navigate local market trends and demonstrate operational competency.

Our success will be gauged significantly by our performance in the Japanese market. While the entry barrier into Japan is formidable, we're aggressively pursuing opportunities in this market and have begun to see tangible results. A breakthrough in Japan could pave the way for smoother penetration into other overseas markets, such as the US or the EU.

 

As the founder of your company, you've achieved significant milestones over the past 20-30 years. Eventually, there will come a time for you to retire and for the next generation to assume leadership. What milestone do you aspire to achieve by the time you retire?

By 2030, coinciding with the target year for realizing our BMT Vision 2030, I aim for us to rank among the Global BIG 3 in the instrument fitting and valve manufacturing sector. It's my dream to see this vision come to fruition, and I'm committed to accelerating our progress toward achieving it as swiftly as possible.

 


For more details, explore their website at https://superlok.com/eng/

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