Kai Completes Wing Panel Plant in Sancheong

November 08, 2013 07:30 l November 08, 2013 07:48

       

Korea Aerospace Industries said on November 7 it held a completion ceremony for its new plant in Sancheong, South Gyeongsang Province. The Sancheong plant is a dedicated facility to produce the wing parts for Airbus A320 aircraft. Begun construction in October 2012, the 97.2-billion-won factory was completed in August this year and has since been undergoing pilot operation.

KAI president Ha Sung-yong said in a commemorative speech, "In October this year our company announced a long-term growth vision and set the target sales revenue by 2020 at 10 trillion won. The Sancheong plant is an important piece of this strategy as it will be able to achieve a 1.4-trillion-won sales revenue by 2025 following supply of wing panels for 40 A320 airplanes from 2015."

Earlier in March this year, Korea Aerospace Industries had signed an agreement with Airbus to supply lower wing panels for A320's worth $1.2 billion. Under the terms of the contract, the Korean company will supply the wing parts for 500 airplanes a year for 12 years between 2014 and 2025. 

Analysis

Action: Opening new plant by KAI in Sancheong. What is interesting in this action? First of all, that fact that KAI (Korea Aerospace Industries) is JV of Samsung, Daewoo and Hyndai. Second of all Airbus is French firm and I have no idea why Airbus decided to place orders for plane parts in Korea. Probably because global Aerospace industry especially Airbus and Boeing find new way of increasing fuel efficiency through wing shape and Airbus decided to place new plant for new wings in High-tech country such as Korea. But still I have question why only wing parts for A320 not for all models? Or maybe later new KAI plant begin produce another parts for different models of Airbuses.

Target : Producing of wings parts for A320. Increasing of long-term profit of JV as a KAI president said “Target is 10 trillion won by 2020”

Affect : In recent years Korean government made barriers for Chaebols in purchasing facilities because Chaebols became more powerful than government organizations. By this tend Chaebols have to carefully select types of facilities for purchasing, to decrease influence of government barriers. I can classify this action as investment in facilities which is the part of the company capital. As a result this action caused increasing in capital of the company. But this new plant is created to increase national wealth because parts produced in Korea will be sold abroad. Money flow directly from abroad into Korean economy, that’s why Korean government allowed to JV of three biggest Chaebols build this plant and increase own capital without any barriers.

Rationale

Kolon opens new plant to expand fabric biz

By Park Ji-won Kolon Group said on Thursday that Kolon Fashion Material, a textile affiliate of the conglomerate, opened a fabric plant in Yangju, Gyeonggi Province, Wednesday. The company said that the plant will focus on making knit fabric and boosting research and development (R&D) activities and helping facilitate the expansion of its business in China. “To meet rising demand for functional fabric in Korea and China, we decided to open the factory targeting the Chinese and domestic functional fabric market,” CEO Kim Chang-ho at Kolon Fashion Material said. The knit fabric is broadly used for functional clothes, such as Uniqlo’s “Heattech” and outdoor clothing. Kim added that the firm plans to post 150 billion won ($141.4 million) in sales by 2018. The firm has been focusing on woven fabrics but recently shifted its attention to the knit business to catch up with industry trends. “The North Face, Columbia Sportswear, Jack Wolfskin and some big global firms would be our customers,” company official Lee Jae-soo said.  “The new factory is likely to bring efficiency to the group in raising sales,” said analyst Kim In-pil at IBK Securities.

Analysis

Action: Opening a fabric plant by Kolon for functional textile.

Target is making knit fabric and boosting research and development (R&D) activities and helping facilitate the expansion of its business in China. Originally Kolon Fashion Material purpose was to supply local apparel manufacturers with woven fabrics. By supplying of local apparel manufacturers Kolon contributed to the national economic development. But now they change their focus on R&D of the functional materials. According to the article their main customers will be foreign companies such as North Face, Columbia Sportswear and some others. By changing business paradigm from contribution to national economy to creation own revenue, they shows us perfect example of changing in rational of the company.