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THN: Advancing Quality Standards with Innovative Low and High-Voltage Solutions

Interview - April 17, 2024

As Hyundai's first-ranked partner, THN has specialized in the development of low and high-voltage systems, including network modules, junction blocks, and internal charging components, while maintaining Hyundai's stringent quality standards. With facilities located globally, the company prioritizes the production of lightweight, energy-efficient, and cost-effective solutions.

MR. SEUNG-HOON CHAE | CEO OF THN

As Korean multinational corporations (MNCs) have achieved success in both consumer markets and high-tech industries, domestic suppliers have emerged in Korea. With Korea's industry becoming a significant global player, critics argue that the SME sector may face challenges being squeezed between emerging and established manufacturing powers, potentially limiting their international growth. Do you agree with this viewpoint? How can SMEs diversify their client base and reduce reliance on Korean MNCs?

I agree with your argument to some extent because I believe we are at a critical turning point in transition. It's only natural for us to position ourselves between China, which is labor-intensive, and Japan, which is technology-driven. However, I think the way forward is clear: we must orient ourselves towards technological advancements. Yet, it's risky to abruptly shift from a labor-intensive to a technology-oriented structure. Instead, we should gradually transition, perhaps aiming for a fifty-fifty, sixty-forty, or seventy-thirty split between labor-intensive and technology-driven approaches. Many conglomerates suggest that by joining forces with SMEs, our cost-driven structure can go global. However, technology demands significant capital investments, which have been overlooked due to our emphasis on cost. While we emphasize electric vehicles (EVs), they remain costly, and even carmakers prioritize cost reduction. Increasing our technological prowess through R&D investment is challenging for SMEs. Therefore, we face a critical juncture in advancing our portfolio, as the reality differs from our goal of becoming more technology-driven through R&D investment.

 

The recent supply chain disruptions affecting the automotive industry, such as the pause in wiring harness supply from China in February 2020 and semiconductor disruptions for vehicles in 2021, have prompted international governments to implement trade policies aimed at encouraging supply chain realignments. This geopolitical situation presents opportunities for the Korean automotive industry, exemplified by the overseas success of Hyundai Mobis, which achieved a second consecutive record in 2023 with component orders worth USD 9.22 billion from global automakers. What opportunities does this global realignment create for Korean companies? How well-positioned is Korea to benefit from these strategies?

Survival is crucial because until now, we have relied on a single country like China due to cost advantages associated with mass production. However, recent events such as the pandemic, wars, and political turmoil have highlighted the risks of depending solely on one country. Consequently, we have started diversifying our operations. This poses significant challenges for us because countries vary in terms of efficiency and cultural nuances, requiring a corporate and structural shift to embrace global differences. To succeed internationally, we need extensive research, expertise, and experience to understand diverse countries and their people. Adequately trained employees who grasp the importance of embracing cultural differences are essential for our success. Failure to address this could hinder our ability to benefit from the global supply realignment trend, impacting our survival. Given that our company's core revenue stems from labor-intensive structures, collaboration and understanding of the most efficient production facilities are vital. Therefore, we are heavily investing in enhancing our technological capabilities, recognizing technology as our path forward.

 

Regarding the exponential growth in technological demand within the automotive industry, it's evident that cars have evolved significantly over the past few decades. Electric vehicles (EVs) have become mainstream, and there is growing interest in hydrogen cars. How do you navigate this rapidly evolving market while building up your technological facilities?

Due to our company's size and volume, we typically collaborate with Hyundai, our major client, for product development. However, we also produce some products independently. Rather than simply reacting to changing trends, our approach is based on strict principles: products must be lightweight, have improved energy consumption, and be cost-effective for our clients. To address the evolving automobile industry, we emphasize the importance of corporate culture due to our small team size. We strive to engage our personnel in a fun manner to better interact with corporate partners, encouraging product development and investment in R&D.

 

Introduced by Tesla in 2019, the zonal wiring architecture allows OEMs to redesign harnesses, reducing length, complexity, and improving the cost/mass ratio. Multiple innovations in the electrical industry are promoting this architecture. How does THN adapt to and remain flexible with new technologies, assembly processes, and industry quality standards?

In terms of quality, we maintain our position as Hyundai's -best partner. Five years ago, when I assumed office, our company's quality was lacking, but we made it a priority to become second to none among our peers, a status we've upheld for three years. While I'm not a technician, my background in finance informs our approach to costs; we aim to be fast followers in the industry's technological shifts, developing potential technologies in collaboration with university research centers like KAIST. The emphasis on hardware in mobility is changing, with a shift towards AI-driven vehicles. This evolution highlights the importance of focusing not only on exterior appearance but also on interior software, leading us to collaborate with university research centers.

 

You mentioned improving quality during your tenure and your involvement in one of the first FCEV SUVs. What was it like collaborating with Hyundai? What capabilities did you develop, and how can they attract more clients?

Regarding the FCEV Nexo and our technological cooperation with multiple institutions to develop it, many corporations were involved due to profitability reasons. Some failed to maintain the process, but we persevered and found it to be an alternative for future industries, benefiting from the byproducts. Regarding BYD, we're not deeply involved in a partnership, but initially, we're focused on improving durability rather than cost-effectiveness, which has attracted many global clients.

Before delving into technical questions, I'd like a detailed understanding of our current technology portfolio and collaborations with academia. We're currently developing a film with a university research center to enhance safety for electric vehicles (EVs), making them immune to electromagnetic waves. While most current products are classic, we aim to integrate high technology into them as EVs become mainstream, particularly in safety enhancement systems.

As for our current technologies and industry trends, including ECU, network modules, high-voltage systems, junction blocks, OBC cable charging, and internal charging.

We have developed cutting-edge power distribution units for EVs and HEVs, as well as battery distribution units. With our engineering capabilities, we can tailor those products to any of our customers requirement.


 


Furthermore, we have developed charging cable box. A device for charging electric vehicles by connecting them to an external power outlet in an emergency.


 


Looking at our company's growth over the last three years, which reached 464 billion KRW in 2022, key drivers include clients' trust in our high quality and the timely development of products that became mainstream in the market.

Regarding our facilities worldwide, in China, Vietnam, the Philippines, and Paraguay, our strategy aims to reduce costs and comply with institutional regulations. We classify regions based on language, such as Spanish-speaking Paraguay and English-speaking Philippines, to operate production facilities efficiently and enhance profitability. We're experimenting with a plant in Mexico starting production this year, staffed by an employee from Paraguay to optimize operations.

 

The US is the home of massive manufacturers like Chevrolet and Ford. It's also a market with significant subsidies and growth opportunities. How does the US fit into your growth strategy?

In response, the US is a major player in the global automotive stage, making it a primary objective for car parts makers worldwide to expand into its market. It's akin to a singer's dream of performing at the Kennedy Center—a symbol of global expansion for car parts makers. The Biden administration is actively encouraging production in the United States to revive the U.S. manufacturing industry and secure the supply chain. Taking this into consideration, we are planning a strategy to enter the U.S. market using Mexico. Therefore, we are considering expanding our global market with HMG, our main customer, and plan to secure market share as a Tier-1 leader in the EV parts market.

 

Looking back at the last three years, where the focus was on promoting quality and transitioning from labor-intensive to technologically driven operations, what would you like to achieve as a company in five years?

Given the volatile nature of business, it's challenging to predict, but our current objective is diversifying our client base by nurturing skilled personnel. We aim to acquire more certifications like the Germany VDA certificate through partnerships with companies like Continental. Additionally, we're expanding into markets like the Philippines, Mexico, and the US.

One key challenge we face is adapting to different corporate cultures post-pandemic. With remote work blurring traditional boundaries and emphasizing individualistic traits, efficiently managing our company requires bridging these cultural differences. Our focus is on re-establishing a dynamic corporate culture that evolves alongside changing times.


For more details, explore their website at https://www.th-net.co.kr/?lang=en

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