POSCO CEO Ohjoon Kwon visits the POSCO Chemtech anode material factory and is seen examining the cathode plate coating used in secondary batteries.

“The demand for mid to large-sized secondary cell batteries for electric vehicles and energy storage systems (ESSs) is rapidly growing,” CEO Kwon said. “We will build a smart factory to produce the world’s best anode materials and secure future competitiveness in the battery material business.”

Kwon observes the anode reheating process of the production line completed last July.

POSCO Chemtech has expanded its production capacity to 6,000 tons per year through technological development and investment, but with the newly announced plant, it will have the capacity to produce 30,000 tons per year with over KRW 200 billion in sales.

Kwon has been working with POSCO Daewoo and POSCO E&C in order to increase the competitiveness of the group’s non-steel division and has also been involved with the “Innovation POSCO Project”, an initiative aimed to enhance affiliates’ competitiveness.

Kwon and other POSCO executives learn about the current status of anode materials production at POSCO Chemtech.

POSCO also supplies cathode materials for secondary cell batteries through its affiliate, POSCO ESM. In February, POSCO completed construction of PosLX, its lithium production plant, which produces lithium carbonate from lithium phosphate extracted from wasted rechargeable batteries.

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The key components of POSCO’s new strategy include strengthening POSCO’s World Premium Products, improving the profitability of its non-steel businesses, investing in future growth engines, and introducing smart technologies to its group businesses.

Kwon announces a new strategy and the preliminary first-quarter earnings report at the CEO Forum that was held in Yeouido, Seoul, on March 30.

POSCO plans to differentiate itself from competitors by continuing to invest in their advanced World Premium Products. The strategy to expand sales of World Premium Product was implemented at the beginning of Kwon’s first term as CEO and has proven to be highly successful. The share of World Premium Products now represents 50% of total sales.

As for future growth areas, POSCO will push to supply energy storage materials, such as lithium and nickel, using proprietary technologies that extract lithium from salt water or recycled batteries and that refine nickel using low-grade nickel ores. Other key future growth businesses include the production of titanium and magnesium sheets, which are expected to be used in aerospace materials and in luxury cars. POSCO is also planning to expand its natural gas storage and overseas IPP (Independent Power Producer) businesses while continuing to push ahead with its new and renewable energy businesses. By investing KRW 2.5 trillion in these new growth engines over the next three years, POSCO hopes to achieve their goal of KRW 11.2 trillion by 2025.

Aside from pursuing new growth engines, POSCO aims to increase profits from KRW 600 billion to KRW 1.5 trillion in its non-steel businesses by restructuring to focus on its more lucrative businesses. Additionally, POSCO plans to incorporate smart technologies into its group businesses (POSCO E&C, POSCO Energy, and POSCO ICT) and establish a new group-level business platform.

CEO Ohjoon Kwon pledges to double operating profits in three years through the strengthening of both of its steel and non-steel businesses.

In 2014, when Kwon was inaugurated as CEO of POSCO, there were many difficult market conditions both at home and abroad, such as the increasing global oversupply of steel and sluggish industrial demand. Despite these market conditions, POSCO was able to achieve a double-digit operating margin by reducing KRW 1 trillion in costs, restructuring the company, and recording the lowest debt ratio in its history.

POSCO is seeking to create a more balanced portfolio of steel and non-steel businesses as well as domestic and overseas businesses. The company is working to find ways to transform itself into a flexible and advanced enterprise by introducing more smart technology solutions to its existing business areas.

According to the preliminary first-quarter earnings announcement on March 30, POSCO’s sales and operating profit increased YoY by 21% and 27% to KRW 6.99 trillion and KRW 740 billion, respectively. The consolidated sales and operating profit are forecast to increase YoY by 17% and 82% to KRW 14.6 trillion and KRW 1.2 trillion, respectively.

POSCO’s operating margin slightly decreased in the fourth quarter of 2016 but rebounded to 10% in the first quarter of 2017. POSCO E&C is also expected to become profitable in the first quarter. Operating losses at the integrated steel mill in Indonesia and Vietnam decreased while POSCO Daewoo and POSCO C&C saw their operating profits increase.

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SIEMENS is a digital company where “all production processes are optimally integrated and controlled by IT.” Its plant in Amberg is a model smart factory thanks to its 1,000 sensors used to connect its IOT technology that makes it possible to check for abnormalities at each stage of the production process. These sensors can also stop the production line if any defective products are found and replace them with new ones. Also, with the ability to analyze 50 million pieces of process information per day, SIEMENS is continuously optimizing its production processes to ensure the lowest possible rate of defects.

GE is slowly shifting to a software company by combining new IT with its traditional manufacturing processes for aviation engines and power turbines. Recently, the company built digital ecosystems into its factories by bringing in software specialists, creating a digitalization department, and developing diagnostic programs. Similar to POSCO, GE’s power generation turbine plant in Greenville is on its way to being converted into a smart factory. GE also recently opened the Advanced Manufacturing Works (AMW) facility, a space that freely allows engineers to test out new manufacturing ideas.

At POSCO, ever since forming the Smart Solution Council in 2016, they have been integrating ICT into their core businesses – steel, construction, and energy – which has had a significant impact in transforming Korea’s manufacturing industry in the process. In its smart factories, POSCO takes 50 years of manufacturing expertise and combines it with IoT, big data, and artificial intelligence technology to produce and supply high-quality products in an economical fashion.

POSCO’s steel plate factory at Gwangyang Works has transformed its integrated production process by building a data integration infrastructure that encompasses all of its operations and facilities. It has also created a data pre-analysis system that can preemptively detect abnormalities. In addition, they have installed laser sensors with AI functionality on the second hot rolling mill at Pohang Works.

Kwon plans to continue developing new businesses under the “Smart Industry” label. Through close cooperation with POSCO’s major affiliates such as POSCO E&C, POSCO Energy, and POSCO ICT, Kwon ultimately aims to reorganize POSCO’s entire business structure by cultivating several sectors that all embrace smart technology (Smart Factory, Smart Buildings & Cities, and Smart Energy).

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During the review, committee members took note of how Kwon strengthened the company’s corporate structure which he initiated through extensive restructuring, increased the company’s profitability and gave the Korean steel industry a more competitive edge. In fact, from 2013-2014, POSCO’s operating profit increased by 19% from KRW 2.6 trillion won to KRW2.2 trillion won – while its operating margin also improved from 7.3% to 10.8%.

Kwon also received positive remarks for the company’s record-low debt ratio of 17.4% as of the end of last year, the highest volume of global premium products, the successful restructuring of 126 affiliates, and a 55% rise in the company’s stock price.

The committee made recommendations for continued success, which included reforming the company’s non-steel businesses, fostering the growth of junior executives, and breathing new life into the manager training process – all of which Kwon vowed to carry out in his next term.

At the end of the extensive review, it was unanimously decided that Kwon remains as CEO for the next 3-year term. He will be re-elected on March 10 after a general meeting with shareholders and a resolution of the board of directors.

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