Strong localization strategy also works
Hyosung Group Chairman Cho Hyun-joon has invested “proactively” in Viet Nam since 2007, and as a result, Hyosung Vietnam Co., Ltd. has recorded more than one trillion won in annual sales since 2014, making it one of Hyosung's most promising global bases. This was the result of Hyosung’s aggressive investments in Viet Nam under the philosophy of "Only Technologies Survive" when competitors such as China pushed for market dominance based on their price competitiveness of low-value products.
Chairman Cho has laid out a strategy to develop the Vietnamese subsidiary as an outpost for overseas market exploration in order to become a truly global company. After witnessing the rising labor costs and other difficulties in China's business environment, Cho once said, "Vietnam will definitely emerge as the perfect location for globalization,” while aiming at production of spandex and tire cords in Viet Nam. Accordingly, Hyosung Vietnam has become a key driver of Hyosung's new leap forwards. Back in 2008, Hyosung’s Vietnam subsidiary recorded only 6 billion won in revenues, but it has remained in the black since 2009, with its overseas sales exceeding 1 trillion won driven by strong sales and operating profit.
Since the mid-2000s, Hyosung has sought to maximize the production capacity of its Vietnamese plants as a composite production base for major products, including spandex, tire cords and heavy power generators. Of note, it has managed to maximize its production efficiency by taking advantage of a consistent production system for spandex and tire cords.
Hyosung has continued efforts to expand its production capacity in Viet Nam by producing spandex, tire cords and steel cords since its founding in 2007. In 2015, it set up Hyosung Dong Nai Co., Ltd. on the site next to its Vietnamese counterpart, adding spandex, tire cords, and production facilities such as motor vehicles and nylon.
Of particular note, Hyosung Dong Nai completed the production facilities of PTMG (polytetramethylene glycol), a raw material for Hyosung's spandex brand Creora, in 2016 and launched full-scale spandex production. Hyosung's nylon is also getting ahead in the development of new markets and differentiated products, backed by its strong collaborative marketing with spandex while securing cost competitiveness through local production.
The industrial materials division, which focuses on reinforcement for tires, also maintains a consistent production system. Hyosung Vietnam is the only manufacturer in the global market to produce three tire reinforcement products, including tire cords, steel cords and bead wires, to strengthen its competitive advantages in the global market.
Chairman Cho meets Vietnamese PM
Hyosung Vietnam has continuously expanded its key product manufacturing facilities, including spandex, tire cords, and steel cords, and has also advanced to the Vietnamese market by tapping into the Vietnamese LPG market. Chairman Cho Hyun-joon met with Vietnamese Prime Minister Nguyen Xuan Phuc in November 2016 to discuss cooperation on local infrastructure projects and new investment projects, and signed a memorandum of understanding with the Vietnamese government in February 2017. Hyosung is now gearing up to establish production facilities for propylene (PP) in a southern industrial estate in Vietnam.
Hyosung is also speeding up its advance into the local power market, including electric motors, ultra-pressure transformers, distribution transformers and GIS. Viet Nam has seen its electricity consumption rise by more than 9.7% a year, backed by rapid economic growth. Accordingly, Hyosung's heavy industry business, which focuses on heavy voltage transformers and breakers, is expected to be a momentum for growth. With the expansion of its local plants, Hyosung is expected to gain a strong supplier position in Viet Nam to introduce high-efficiency and premium motor vehicles.
Hyosung Vietnam has grown in a short period of time thanks primarily to the proactive investment strategies of its Honorary Chairman Cho Suk-rae and Chairman Cho Hyun-joon. Having seen Chinese labor costs and land tax continue to rise while operating a Chinese manufacturing corporation, Hyosung decided to develop Viet Nam into a strategic base. In addition to resolving China's high cost burden, it is considered a "divine measure " that judged Viet Nam as a major target of investment in order to strengthen its investment in the Asian market.
Since the mid-2000s, Viet Nam has emerged as a country that will lead the next-generation Asian market as a post-China candidate for domestic consumption and geopolitical reasons. The Vietnamese government started to attract foreign capital by simplifying the relevant procedures for foreign investment corporations and reducing the time required to issue investment certificates for industrial development. Hyosung also decided to invest in the Dong Nai Industrial Complex, which provided support from the Vietnamese government, including corporate tax reduction. In 2015. Hyosung established Dong Nai Co., Ltd. while expanding the win-win relationship with the Vietnamese government in 2015.
Strong localization strategies have also been a key to success. Hyosung has been transferring the business expertise of Hyosung to Viet Nam, which has accumulated over the years, ranging from human resources, administration, finance and strategy to sales, production and quality management, in an effort to become a local focused corporation.
Hyosung Viet Nam is also expanding social contribution activities in and around the city of Ho Chi Minh. Hyosung has officially sponsored the Hyosung Championship, the opening match of the 2018 Korean Ladies Professional Golf Association (KLPGA), held at the Twin Doubs Golf Club in Ho Chi Minh City, Viet Nam for three days from Dec. 8.
Since 2011, Hyosung Viet Nam has offered medical services to Vietnamese living in and around its work sites. For seven years in a row, medical service has helped about 10,000 Vietnamese people, and more are receiving treatment each year. In 2014, Hyosung invited high-risk patients discovered during the course of medical treatment to Korea and provided them with the full cost of surgery. Hyosung has distributed glasses to people with low vision since 2016.
In addition, it is engaged in social contribution activities by making pamphlets in Vietnamese and donating more than 200 computers to elementary, middle and high schools near its business sites. It has five mini-libraries in neighboring areas to help students use them as a place to read books and play.