SK Corporation Is Not Just a “Domestic-Only” Business

Despite its slogan, “Global management,” SK Group is widely perceived as a company living on domestic demand, with oil refining—which relies on imported raw material—and heavily domestic market-oriented telecommunications constituting its two pillars.

SK Group, however, can now boast of a brand image based on global business, as its affiliate manufacturers saw their exports exceed 50 percent of their entire revenues for the first time last year. It has been highly encouraged by the fact that the main source of its manufacturing revenues shifted from domestic demand to exports.

SK Group announced on April 25 that its four manufacturing affiliates—SK Corp., SK Chemicals, SKC and SK Incheon Oil—generated a total of 29.8723 trillion won in revenue last year, out of which exports accounted for 50.26 percent (15.149 trillion won). “It is unprecedented that exports by affiliate manufacturers surpassed half of our entire revenue,” explained the conglomerate.

Recently, the share of exports by manufacturing affiliates in whole revenues has continuously risen to 47.25 percent in 2004 and to 48.86 percent in 2005. Ten years ago, the number stood at 30.82 percent.

Major export items include: gasoline and other light oils, petrochemical products including naphtha (SK Corp., SK Incheon Oil), high-quality lubricant oils (SK Corp.), polyethylene terephthalate (PET) film (SKC), and high-quality container materials (SK Chemicals).

Though not calculated as exports, overseas production is also active. Last year, SK Chemicals completed an adhesives factory in Jiangsu Province, China and began production there. At the same time, SKC initiated construction of a PET film factory with a monthly production capacity of 300 tons in Anhui Province, China.

“Technology” and “management know-how” are being exported as well as products themselves. Having introduced the “Knowledge Management System” in 1999, SK Corp. has specialized and systemized the company’s internal knowledge and exported its facility operations know-how to newly emerging refineries in Africa, Southeast Asia and elsewhere.

The company’s technology exports—with management techniques included—grew from 18.8 billion won in 2000 to 90 billion won last year. “It is projected that we will make technology exports worth around 91.5 billion won this year, including 3.5 million dollars (equivalent to around 3.3 billion won) in exports to the Ghanaian company of TOR,” said an official from SK Corp.

The acquisition of SK Incheon Oil played a decisive role in the dramatic increase of SK Group’s exports.

Last year, SK Incheon Oil, a company whose major export items are naphtha, Bunker C oil and jet oil, recorded 2.719 trillion won in export, nearly double its domestic sales of 1.4176 trillion won. Some indicate the group is heavily dependant on exports by certain affiliates.

SK Corp.’s exports also increased from 10.6889 trillion won in 2005 to 11.4542 trillion won in 2006. Meanwhile, exports by SK Chemicals declined from 774.9 billion won in 2005 to 472.7 billion won last year, and those by SKC also fell from 461.6 billion won to 369.0 billion won during the same period. Regarding this, SK Group explained, “The figures dropped ostensibly as some of the production lines were spun off as subsidiaries.”

swon@donga.com