Samyoung Electronics’ innovative approach to balancing cost-effectiveness and superior quality. Specializing in aluminum electrolytic capacitors, the company’s strategic investments and product development initiatives are driving advancements in next-generation mobility technologies, including electric vehicles and solid-state drives.
How can Korean companies compete against Japanese and German superpowers? What is the role of Korean SMEs in the global supply chain?
There are both merits and demerits for conglomerates that are nurturing the overall ecosystem with their affiliates and SMEs as partners. There have been instances where the importance of SMEs was overlooked due to an ecosystem disproportionately focused on conglomerates. However, during the pandemic and Japan's unilateral export ban on Korea, the significance of indigenous Korean parts, materials, and components has become more pronounced, serving as an inflection point. Nevertheless, as our emphasis remains largely on Korean conglomerates, we find ourselves trailing in technological advancements for parts and materials compared to Japanese or German counterparts. Moreover, cost-wise, we struggle to compete with Chinese contenders. The primary focus for all Korean SMEs will be how to thrive in this ecosystem.
As you mentioned, one of the merits lies in the speed of execution. Another advantage is the top-down management system, enabling more agile decision-making and audacious heavy investment. Additionally, we boast sophisticated applications, leveraging our foundational technology to provide tailored, customized, and optimized solutions for clients. For instance, during the pandemic, we swiftly developed the drive-through system. Our strategy is to provide wider technological innovation and efficiency to our customers with unique underlying technology and IT infrastructure.
Regarding your second question, based on our sophisticated ICT, mobile, or semiconductor technologies, I envision Korean SMEs enhancing our role in the global supply chain as providers of these advanced technologies. Ultimately, we must transition to the EV sector to enhance the reliability and convenience of electric vehicles.
The EV sector, alongside semiconductor and other high-priority technologies, is currently experiencing significant disruption due to the geopolitical situation. In recent months, international governments have implemented trade policies aimed at promoting supply-chain realignment. Overall, this shift is providing opportunities for new suppliers to integrate into large conglomerates’ ecosystems, including Korean enterprises. From your perspective, what are the benefits and challenges arising from this reorganization of the supply chain?
With heightened tensions between the U.S. and China, coupled with the pandemic, we've come to recognize the critical importance of diversification. We've made substantial investments in indigenous parts and materials, as well as enhancing our competitiveness in semiconductors, to solidify our position in the global market. Leveraging the robust ROK-US Alliance, we're heavily investing not only in North America but also in Central and Latin America to bolster technological exchanges. In the sector of parts and materials technology, we're also expanding investments in Mexico and North America. These efforts are all part of our strategy to maximize the benefits of the IRA and the Chips Act.
You mentioned the importance of diversification. Looking at Korea's history, the relationship between large conglomerates and SMEs has been mutually beneficial, creating a trickle-down effect. However, this relationship seems to be stagnating as many SMEs have become overly dependent on a single client. You've been successful in diversifying your portfolio, particularly by expanding into Japan and China. From a conceptual standpoint, how crucial is it for Korean SMEs to broaden their client base and reduce reliance on Korean conglomerates?
We've evolved into an LCR parts total solution provider because we recognized that competing solely with capacitors wasn't feasible, despite starting as an aluminum electrolyte condenser company sixty years ago. Initially, we struggled to develop our own technology as we heavily relied on a single conglomerate. However, now we're striving to integrate the cost competitiveness of Chinese companies with the sophisticated technology of Japanese firms. As part of these efforts, we established an affiliate called SNA this February and formed partnerships with renowned Korean company ABCO. Additionally, we're preparing a collaboration with a Japanese company for inductors and coils used in automobiles to adopt advanced technologies. Conglomerates we partner with are no longer solely focused on mass production or cost competitiveness; they seek customized, tailored solutions aligned with their precise needs.
Traditionally, partnerships between conglomerates and SMEs followed a top-down approach, with conglomerates designing and developing products and requiring partners to meet set standards. Now, as more specialized partners, we're collaborating with conglomerates from the development phase. For instance, while consumer goods like TVs can be immediately recalled in case of errors, automobiles and data centers demand higher reliability and safety. Thus, we're intensifying our R&D efforts to enhance reliability and safety in these sectors.
In the past, SMEs specializing in resistors, inductors, or capacitors followed instructions from conglomerates in a top-down manner. However, to address noise issues in both high and low frequencies and meet stringent requirements, we've adopted a broader perspective to understand the overall landscape. This led us to establish SNA as a turnkey or total solution provider, enabling us to delve into circuit and module parts as well.
You've had a significant market share in displays and TVs. However, your focus is now shifting towards EVs. Could you elaborate on the importance of the automotive industry for a company like yours? How do you envision the future for a company such as yours in the EV industry?
It's true that for the past two decades, our focus has been on consumer goods. However, as you're aware, entering the automotive sector means engaging not only with global OEMs but also with electric parts companies, which play a significant role in this domain. In the era of internal combustion engine vehicles (ICEVs), mechanical mechanisms held greater importance. However, with the shift towards EVs, electric parts have gained prominence due to the increased importance of sensors and safety components within EVs. Previously, automobile features like windows and radios dominated, but now we see a shift towards components like airbags and autonomous controllers, which demand more advanced electric parts. To successfully enter the EV sector, preparation must begin well in advance, typically three years in advance, and that's precisely what we've been doing.
We've observed over the past few years that while mobile devices and displays were experiencing rapid growth, recent years have seen stagnation in demand, partly due to high interest rates among other factors. Where do you anticipate growth in the electronic industry coming from? Will it predominantly be driven by the EV sector, or do you anticipate growth from displays and home appliances over the next 12 months to three years?
It's accurate that consumer goods currently contribute to more than 70-80% of our total revenue. However, we're aiming to reduce this to 30-40% to allocate more investment into the EV sector. Concerning consumer goods, we're strategizing on how to compete with low-cost Chinese competitors. Yet, we believe our ultimate goal lies within the EV sector, where our competitive edge shines against Chinese or Japanese rivals. However, a prerequisite for this shift is to bolster reliability and engage in R&D from the outset, given the high entry barrier. On a personal note, I have experience in the R&D Center, particularly in developing proprietary technology, akin to secondary batteries. Currently, we're exploring new business ventures related to secondary batteries. I firmly believe that proprietary technology is paramount because without it, we cannot develop high-value-added products.
How do you envision the evolution of the industry with the emergence of new technologies such as AI and IoT, which are rapidly becoming mainstream? How do you foresee the disruption caused by these technologies, and how is your company adapting to them?
AI is poised to become even more powerful in the future, with current applications including failure detection and quality control in production facilities. This is why we've opted to develop a hybrid condenser to address previous challenges like aluminum lifecycle or inflammation issues. Our strategy for future growth involves integrating fourth industrial revolution technologies to enhance the reliability and safety of capacitors.
Established over 55 years ago, Samyoung Electronics has evolved into a total solution provider for capacitor technology, specializing in the development, manufacturing, and sale of electrolyte capacitors and capacitor materials. With such a long history, how would you define Samyoung Electronics today?
Our aim is to become a comprehensive solution provider encompassing capacitors, proprietary technology, manufacturing, and marketing. Originally founded as a specialized condenser company 55 years ago, we acknowledge that our historical focus may now be considered a weakness. In today's landscape, we prioritize diversity, optimization, and tailored solutions for our clients over specialization. Consequently, we are gradually transitioning away from our former specialty-focused business strategy. Leveraging our pride in our 50-year history and our robust financial standing, we are pursuing aggressive mergers and acquisitions to integrate other elite companies and venture into new business areas. This year marks the beginning of our hybrid condenser initiative, and as we approach our 60th anniversary next year—a milestone with special significance in Korea—we are conducting a comprehensive review of our various business ventures to emerge as a true total solution provider.
Could you provide further insight into how you're currently differentiating yourselves? How does M&A enable you to meet the evolving needs of your clients in the condenser industry and diversify your portfolio?
Our M&A activities aim not only to diversify our portfolio but also to reinforce the strength of our existing business. Relying solely on condensers is no longer sustainable for us. We recognize the necessity of developing customized condensers utilizing our proprietary technologies and expanding into other complementary businesses.
For instance, Nippon Chemi-con, one of our partners, specializes in various electric parts including super capacitors and MLCCs. However, even with their advanced technology, they struggle to meet the specific requirements of Korean conglomerates, such as flexible deadlines and rapid execution. Korean brands prioritize customized and optimized solutions, and we aim to address this demand by collaborating closely with our conglomerate partners from the initial stages of development. By leveraging our chemical technology and partnering with conglomerates, we aspire to establish ourselves as a top-tier player in the global market.
As you focus on nimbleness and providing customization to your customers, do you anticipate that future clients, particularly automotive companies, will prioritize these qualities from your company over relying on high technologies from Japanese manufacturers?
High technologies provided by Japan or Germany serve as the foundation, particularly in terms of safety and reliability. However, I believe the technological barrier isn't as formidable as it once was, as bridging the technology gap has become more accessible in today's landscape. For instance, Chinese competitors swiftly replicate the latest versions of Apple products. The challenge lies in how we approach addressing these technological disparities. This necessitates engaging in partnerships with conglomerates from the development phase to tackle certification and verification issues.
In contemporary times, I perceive customized and optimized solutions to be more crucial than the technology itself. Even Japan and Germany encounter challenges, as Korea has been able to capture market share they previously dominated. This was achieved by integrating high-quality services with our technology.
What technologies do you prioritize today to approach new customers and businesses?
We don't view aluminum and hybrid technologies as distinct entities. Instead, we're pursuing a solid-state approach that integrates the strengths of both electrolyte and solid-state capacitors. For instance, while electrolyte capacitors have limitations in terms of lifespan, solid-state capacitors are prone to breaking easily. Our goal is to enhance lifecycle, reliability, and safety by developing a hybrid version that leverages the advantages of both technologies.
Hybrid capacitors offer higher reliability and resistance to high temperatures compared to ceramics, albeit with slightly lower performance in terms of frequencies and a higher price tag. How do you plan to ensure that your products remain competitive?
Hybrids can address the weaknesses of aluminum capacitors, which have a shorter lifespan, and tantalum capacitors, which are significantly more expensive than aluminum. Currently, tantalum capacitors are utilized in 5G data centers. However, a major drawback is their flammability. In the event of a fire in a 5G data center, all data could be lost, posing a significant risk. Therefore, hybrid capacitors emerge as the only alternative capable of complementing the weaknesses of both aluminum and tantalum capacitors.
I've noticed that your focus has predominantly been on aluminum capacitors, although you also possess technology for ceramics. Could you elaborate on your new business ventures? What prompted the initial focus on aluminum?
Initially, our emphasis on aluminum electrolyte capacitors stemmed from our largest shareholder, Nippon Chemi-con, specializing in thin film or the ceramic type you mentioned. While we initially specialized in aluminum electrolyte capacitors, we are now diversifying our portfolio to include other types of capacitors as well as inductors.
In the automotive industry, controllers, sensors, cameras, and various other products operate at different frequencies, each with unique aluminum requirements. What are the current major demands in this field, and which applications are your products targeting? Could you also highlight Samyoung Electronics' flagship product?
In the automotive sector, our primary revenue comes from onboard chargers (OBCs) and the ICU (In-Car Unit). Within semiconductor parts, our largest revenue streams come from SSDs for corporate use and SMD types. We've ensured the stability of our production facilities by incorporating the latest technologies from Japan.
Our revenue isn't solely derived from onboard chargers; the capacitors used in charging stations also contribute significantly to our global revenues. As for Energy Storage Systems (ESS), we're addressing concerns related to flammability, positioning ourselves to serve corporate clients focused on environmental protection rather than low-cost photovoltaic companies in China.
I'd like to delve deeper into the opportunities you're exploring in the international market. You mentioned adapting to different customer standards. Could you elaborate on where you see your future customers and the demand for the EV market for your company?
Currently, our primary focus lies on Korean automakers. We aim to expand our market share by offering our production capabilities to these Korean conglomerates. In terms of the global market, we anticipate future opportunities as Korean medium-sized companies secure projects with ODMs or OEMs in Europe. Upon their success, we plan to expand our scope to global automakers. While we are already expanding our presence, the European market is our main target.
In terms of expanding your services internationally, including overseas sales and establishing subsidiaries, what does the future hold for Samyoung Electronics?
One of our primary challenges revolves around managing the risks associated with the Chinese market. Despite its inherent risks, we cannot ignore the immense size of the Chinese market. Given the current geopolitical climate, particularly with the US attempting to reduce China's role in the global supply chain, we're adapting our operations in China. This involves transitioning from raw material procurement to production and sales within mainland China.
Furthermore, we recognize the importance of diversifying our physical logistics and distribution channels. It's crucial for us to avoid over-reliance on a single market. For instance, we're mitigating the risks associated with China by reshaping our operations within the country to encompass everything from raw material procurement to design and production, all within the mainland. Apart from China, we’re also eyeing the Southeast Asian market by leveraging our collaboration with our partners in Southeast Asia. Moreover, with Korean automakers making strides in India, we see potential opportunities to expand our presence in that region as well.
Can we anticipate seeing your products, particularly your upcoming hybrid products, making a presence in North America and Europe?
Currently, our primary focus is on producing indigenous hybrid condensers, given the consistent mismatch between demand and supply in recent years. However, our long-term objective is to penetrate the North American and European markets, especially considering the increasing global recognition of our brand.
If we were to reconvene for an interview in 2028, what objectives would you like to have achieved within the next few years?
Our primary objective is to increase the revenue share of EV market to over 50%. Even conglomerates traditionally focused on electronic devices, is now venturing into EV market, aligning with our future direction. Many companies are exploring hybrid capacitor technologies, but only two are true hybrid capacitor manufacturers globally. We aim to localize these technologies and emerge as key players in the hybrid capacitor market. Already, we are making significant investments toward this goal.
For more details, explore their website at https://www.samyoung.co.kr/eng/
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