Samkee Bets on Robust Agility and Reliability

The domestic automotive market in Korea is highly saturated, with many players collaborating closely with major OEMs like Hyundai and Kia. Many industry experts suggest that Korean automotive companies must now pursue aggressive overseas expansion to secure future growth opportunities. Do you agree with this sentiment that the domestic market is saturated, and that changing the business model to focus more globally is necessary?

I completely agree. The domestic market has always been saturated since we started the business. We have consistently tried to diversify our customer portfolio. The largest contract we secured was with Volkswagen in 2014. However, we always aimed to establish a small footprint in the U.S. market, as we anticipated that globalization might be disrupted, which is indeed happening today. From 2017, we pursued a small toehold in the U.S., but due to disagreements with customers and the impact of COVID-19, our plans were delayed. Last year, we finally opened our factory in the U.S. I firmly believe it was the right decision, not only because of recent tariffs but also to serve the U.S. market, which remains the largest and most important automotive market in the world. Regardless of political changes, the challenges facing globalization will persist, and having operations in the U.S. is a sound move.

You mentioned that the U.S. market remains the most critical for the automotive sector. In Q1 2025, the sales of new cars in the US have grown by approximately 3.3% year-on-year, with the new EVs increasing by 11.4%. Overall, sales of SUVs benefited to GM, Toyota’s hybrids have seen growth and a strong performance from Korean sedans. How do you assess the growth outlook for the U.S. market this year and over the next three years?

We do not engage heavily in forecasting. We learned, particularly when we entered the EV market around 2015-2016, that for a company of our size, trying to foresee the market is almost impossible. Instead, we focus on being nimble and ready for any changes. That said, I still believe the U.S. auto market will remain the most critical and largest market globally. Maintaining a strategic focus on the U.S. continues to be crucial. Korean companies are performing well there, which is very encouraging.

Turning to Europe, a region that historically has been very dynamic in terms of automotive manufacturing and innovation, how do you perceive the current market conditions and competitive landscape in Europe?

Europe remains our largest export destination, with Volkswagen being one of our biggest customers. We continue to see solid production in Germany and the broader European market. However, with the rise of EVs, competition between European, Korean, and Chinese players is intensifying. We are cautiously observing these changes, particularly since we have been receiving fewer RFQs and orders from European OEMs, indicating a shift in the market.

Do you believe this slowdown in Europe is primarily due to weaker market demand, or is it more about structural changes in the supply chain and competitive dynamics?

The market is sluggish, as the data shows, but I believe demand will remain solid in the long term. However, the European landscape is evolving rapidly, with Chinese players establishing factories there. We are proceeding with caution.

For Korean manufacturing companies, the importance of "nimbleness," a quality attributed to the fast-paced "bbali-bbali" (hurry-hurry) culture, is very important. How do you see digital technologies, including AI and automation, enhancing the nimbleness and competitiveness of your company?

Digital technologies are already helping us significantly. We were among the first to introduce digital and AI technologies into our shop floor operations in India, particularly for inspection and maintenance. The adoption of these technologies is booming in Korea, supported by government initiatives and startups, and companies are increasingly willing to embrace them.

Samkee America

Could you provide a concrete example of a digital transformation initiative that you believe illustrates Samkee’s leadership in this area?

Although many companies now use digital technologies, we were among the first to automate the inspection of parts, which was previously done manually. Workers used to inspect parts for issues like porosity or defects by flipping them manually. Now, with machine learning and AI vision technologies, we have reduced human error and significantly improved reliability and robustness.

Driven by improved die-casting data monitoring systems, gigacasting has become a major topic globally, particularly as OEMs pursue lightweight structures and manufacturing efficiency. As an aluminum die-casting specialist, could you explain how you foresee gigacasting and other future technologies shaping the automotive manufacturing landscape?

I believe gigacasting will eventually be widely adopted across the industry, but true gigacasting will primarily be carried out by OEMs because it involves manufacturing the car body itself through extremely large casting processes. In terms of technology, capital investment, and operational capabilities, OEMs like Tesla and Volvo are already taking this approach in-house. However, there are still plenty of opportunities for suppliers like us.

Even when OEMs build their car bodies through gigacasting, many structural components—such as members and doorframes—that are traditionally made from steel will increasingly transition to aluminum due to its lightweight properties. For example, we collaborated with Hyundai to develop an aluminum door frame that used to be assembled by welding multiple steel parts. Now, we produce it in a single shot through advanced die-casting.

Additionally, we have developed technology that reduces the required machine tonnage from 6,500 tons to 3,000 tons, making production not only more economical but also faster. This same technology can be applied to EV battery cases, helping to ease bottlenecks caused by the global shortage of ultra-large casting machines.

Although aluminum parts are typically more expensive than steel, we eliminate the need for multiple manufacturing steps, such as welding and assembly, which significantly streamlines the production process. As a result, the overall cost becomes comparable to, or even slightly lower than, that of traditionally manufactured door frames.

Door Inner Panel

There is growing anxiety over the automotive industry's transformation, driven by trends like the shift from steel to lightweight materials and the reduction of parts in EVs and hybrids. Does this structural shift represent more of an opportunity or a challenge for Samkee?

As an aluminum company, we see it as an opportunity. Of course, a new composite material could be developed that outperforms aluminum, but I highly doubt it. Polymers are polymers, and metals are metals. Unless you do something hybrid like CFRP, polymers cannot outperform aluminum in terms of characteristics. Plus, CFRP is not recyclable, which is a disadvantage from an ESG perspective. That gives aluminum an edge.

Established in 1978, Samkee is an aluminum die-casting specialist primarily collaborating with the automotive industry. It has received Best Supplier Awards from Hyundai Motor Group and Hyundai Transys, as well as Supplier Quality Excellence Awards from GM. In recent years, the company has diversified its business into electric vehicles and established overseas manufacturing facilities. Could you walk us through the major milestones that have shaped Samkee’s growth trajectory?

Our core strength has been nimbleness and transformation. We started by making bicycle parts—cranks and pedals—and then transitioned into automotive parts. The first major milestone was when we started making valve bodies for Hyundai and Kia transmissions. This not only helped us grow but also strengthened our technological capabilities. The second milestone was exporting to Volkswagen. Based on our success with Hyundai, we secured supply agreements with Volkswagen, first for their Chinese plant and then for Germany. That's why we have a supply center in Kassel. The third milestone was entering the EV business. In 2015-2016, despite internal opposition and skepticism, especially from executives who came from Hyundai and Kia, we pushed ahead. It paid off. We spun off a company called Energy Solutions and took it public, providing seed money for our U.S. operations.

You have been selected as a supplier by major players such as Hyundai, Kia, Volkswagen, Hyundai Transys, and LG Magna. What do you believe has been the key to earning the trust of such high-profile customers?

There’s no magic formula. We stick to three basics: agility in R&D, flexibility in manufacturing, and reliability in quality. These have been our guiding principles, and they have been well received by our customers.

You mentioned agility, flexibility, and reliability. I would like to ask specifically about reliability, especially in the context of die-casting, where there is always a delicate balance between speed, productivity, and quality. If the process is too fast or the temperature too high, it can cause defects such as holes and other issues. How do you continuously optimize your production capabilities while maintaining high quality and cost efficiency?

Like many companies, we strive to achieve both high productivity and high quality. In some areas, we have been quite successful; in others, we are still working hard to improve. I believe the key to balancing productivity and quality ultimately comes down to the quality of our people—specifically, our engineers. This might surprise you, but many companies rely heavily on outsourced manufacturing engineering. We are one of the few companies in Korea that maintain a very robust and strong in-house manufacturing engineering capability.

Our engineers design not only our processes but often our own machines as well. Sometimes, they even manufacture the machines themselves. After entering the EV business, while our core focus remains casting and machining, we have also expanded into applications for batteries, such as BMS cables. These cables are sensors that detect anomalies within battery cells, which are critical for the safe and efficient operation of EV batteries. In these new areas, too, we design and build our own specialized machines—machines that no other companies are currently capable of producing. We make a conscious decision not to rely on external suppliers for this core equipment.

These strong internal manufacturing engineering capabilities are absolutely critical when it comes to balancing productivity and quality. As you mentioned, many Korean companies are aggressively adopting AI and other advanced technologies. However, I firmly believe that without a robust foundation in manufacturing engineering, such technologies alone cannot ensure true competitiveness. That is why we place a strong emphasis on strengthening our fundamental capabilities.

Of course, for core infrastructure like casting machines, press machines, and machining centers, we purchase equipment from external suppliers. However, when it comes to auxiliary machinery, as well as the core equipment necessary for producing BMS cables, those are machines we design and build ourselves.

You are also heavily involved in the production of aluminum ingots and alloys, which is especially important when transitioning parts traditionally made from steel to aluminum, given the need for strength and performance. Could you explain how this process works and what capabilities Samkee has in terms of alloy development and materials?

We have a dedicated team of engineers based in Seosan, which is our main plant, focused exclusively on the study and development of engine alloys. With the rise of EVs and the diversification of applications compared to traditional internal combustion engine (ICE) vehicles, customer requirements for parts have become much more varied. Depending on the specifications, we either source alloys from the market or develop our own proprietary alloys to meet customer needs. This ability to offer customized alloy solutions is one of our key competitive advantages.

In addition to alloy development, we also produce our own molten metals. This gives us significant flexibility and resilience, especially in terms of cost and supply stability. Whenever there is a shortage of aluminum or a surge in demand—particularly from China, which heavily influences global aluminum pricing—our ability to produce molten metal in-house allows us to be more reliable and cost-effective in securing raw materials. Given Korea's relatively small market size, external shocks from China can have an immediate impact on local prices, so having internal production capabilities is a critical strategic asset for us.

Samkee America was established in 2022 and began mass production in 2024. Given the geopolitical tensions and tariff risks, how do you view the opportunities created by your U.S. factory?

It's a plethora of opportunities. We used to chase projects and customers, but now projects come to us, and we choose the ones that best suit us. The situation has completely changed.

Valve Body

What types of projects are you prioritizing for growth in the U.S., and how do you balance between ICE and EV product lines?

Right now, we have a little bit of everything. Some OEMs continue to focus on their ICE businesses. They are asking us to develop traditional components like engine blocks and valve bodies, which are areas we have been specializing in for over 40 years in Korea. On the other hand, some companies are fully committed to EVs and are requesting components like motor cases and battery cases.

Again, we don't try to predict the market too precisely because it’s very difficult to foresee exactly where it is heading. Instead, we are working to maintain a balanced portfolio between ICE and EV projects to stay flexible and responsive.

At the moment, hybrids are particularly hot. We are seeing a lot of companies requesting development support for hybrid technologies. Some have already launched their hybrid models, while others are still in the development phase. There is also a variety of hybrid types—EREVs (Extended Range Electric Vehicles), PHEVs (Plug-in Hybrid Electric Vehicles), and traditional hybrids—and we are seeing significant demand across all these categories.

One of the key challenges when opening a production facility in the U.S. is the cost structure, given that local manufacturing is significantly more expensive compared to other regions. Additionally, aluminum, which is increasingly being used to replace traditional steel parts—especially in plug-in hybrids—is generally more expensive. How do you manage and minimize costs in the North American market, which is already costly, while utilizing aluminum casting, which can often be more expensive than steel?

Manufacturing costs in the U.S. are indeed much higher than in Korea. However, when it comes to material costs—specifically aluminum—those are generally covered by our customers. In the automotive industry, there is a long-standing practice of linking aluminum prices to global indexes like the London Metal Exchange (LME) or Platts. Some contracts adjust pricing monthly, others quarterly or annually, but in all cases, material costs are tied to market prices, so we are protected on that front.

In terms of manufacturing overheads, electricity is a major factor, but when we compare it to Korea, there isn't a significant difference. So that aspect is relatively manageable.

The biggest challenge is labor. Not only is labor significantly more expensive in the U.S., but it is also extremely difficult to find workers. The labor market is very tight, and many companies—not just Korean firms, but companies from around the world—are building new facilities in the U.S., increasing competition for skilled labor. As a result, we had no choice but to accelerate automation and expand the use of AI-based inspection systems to offset some of the labor costs.

Still, despite these efforts, labor costs remain high. And beyond just cost, finding qualified engineers is a major challenge. We are actively trying to hire as many local employees as possible, but when it comes to specialized engineering roles, it has proven almost impossible to find suitable candidates locally. Because of this, we have decided to dispatch more experts from Korea to support our U.S. operations.

Samkee’s revenue reached USD 492.8 million in fiscal year 2024, with South Korea representing 60% of revenue, and Europe and North America accounting for 20% and 14%, respectively. Looking ahead to the next three years, how do you foresee the company’s growth both domestically and internationally?

Of the 60 to 70% of our revenue that is categorized as domestic, technically about half is tied to exports. When we supply parts to Hyundai or Kia, those parts are installed in vehicles that are then exported overseas. So, in reality, approximately 70% of our business is export-driven, and 30% is local.

That structure, however, is likely to shift. With the current tariffs in place—now at 10%—there is uncertainty about how things will evolve; tariffs could increase to 25% or even higher, and no one can predict it for sure. If that happens, our sales to the U.S. could be impacted. However, we are prepared to adapt by transferring more manufacturing from Korea to our U.S. operations if needed. That flexibility is already built into our strategy.

While we are heavily focusing on expanding our U.S. operations, we are also working to diversify our customer base more broadly. We expect to see growth in other markets such as Europe and China as well, which should help balance out any potential regional risks.

Do you see India as a potential growth market for Samkee?

India is a bit challenging for us. India already imposes tariffs on imports from Korea, so if you want to supply to the Indian market, you really need a local manufacturing presence. We are aware that Hyundai has been expanding aggressively in India, and Kia opened a plant there around 2016 or 2017. At that time, we conducted a detailed study to evaluate whether we should enter the Indian market, but we ultimately decided not to move forward.

Given the ongoing expansion of the Indian automotive market, we are now exploring technology licensing agreements with local companies to localize our parts rather than setting up a full manufacturing base ourselves. We have already invested heavily in our U.S. operations, so we are cautious about committing additional capex to establish a new facility in India at this stage.

You mentioned thinking about long-term opportunities as a listed company in Korea. Given the surge in foreign investor interest in 2024 and Q1 2025, do you see foreign investment playing a role in Samkee’s future growth and expansion?

Absolutely. As a public company, we have always relied on external capital, especially because casting is such a capital-intensive business, with both high capex and high opex. Now, as we move deeper into the EV market, we need to make further investments in R&D. Engaging with foreign investors will be critical to support that next stage of growth.

What key message would you like our readers to take away from your contribution?

In the short term, I think the key takeaway is how Korean companies are responding to the ebb and flow of today’s global market. In the longer term, in an era where globalization is in decline, it will be crucial to see how Korean companies adapt to new international environments.

I am not sure whether this message is directed more at the leadership or at Korean companies themselves, but one thing is clear: Korean companies are excellent at manufacturing. This is true not just for large conglomerates but also for SMEs. Korean firms have the capabilities to compete on a global scale, but many remain somewhat hesitant when it comes to embracing globalization and taking risks abroad. If they can become a little more aggressive and willing to take calculated risks, I believe they can thrive in international markets as well.