1 Changgyo-dong, Chung-ku
Telephone: (82) 2 729 3581
Fax: (82) 2 752 3475
Sales: $6 billion (2002)
Stock Exchanges: Korea
NAIC: 325920 Explosives Manufacturing; 325320 Pesticide and Other Agricultural Chemical Manufac- turing; 551112 Offices of Other Holding Companies
Hanwha was founded in 1952 in the ruins of industrial devastation. Built as an explosives company with the spirit of full-hearted contribution to the nation and society, Hanwha has walked along almost half a century since the start-up. During this half-century period, Hanwha has overcome lots of difficulties and crisis, with the "YOU CAN DO" spirit. Hanwha is now trying to emerge as a new image company.
Hanwha will establish an ideal management system, putting Hanwha's basic spirit, Trust and Justice, into the efficient management and new personnel system that can flexibly cope with the management environment of the 21st century.
1952: Kim Jong-Hee establishes Korea Explosives (Hyun Am) Corporation.
1955: The company purchases Inchon Power Plant.
1957: Korea Explosives begins production of nitroglycerin.
1958: The company begins producing dynamite.
1964: Korean Explosives begins diversifying with the acquisition of Shinhan Bearing Industrial Company.
1969: Korean Explosives backs the construction of the first privately held electrical power generating plant, which later becomes the company flagship as Hanwha Energy Corporation.
1976: Korea Explosives goes public on the Seoul Stock Exchange.
1979: Korea Plastics Industrial Corporation is acquired.
1981: Kim Jong-Hee dies and son Kim Seung Yeon takes over as group chairman.
1985: The company expands into retail sector with the acquisition of Galleria Department Store group.
1990: Hanwha acquires Kyung Hyang Newspaper Company.
1992: The company changes its name to Hanwha Group.
1994: Kim Seung Yeon is convicted of currency smuggling and sentenced to 54 days in jail.
1997: Amidst an economic crisis in Korea, Hanwha begins a companywide restructuring.
2002: The company acquires a 51 percent stake in Korea Life, restructuring itself as a financial and high-technology company.
2003: Hanwha faces three separate charges as part of a government crackdown on corporate corruption.
Hanwha Group is one of South Korea's top ten chaebols--or conglomerates--with diversified holdings stretching from explosives to retail to financial services and beyond. The group operates through a complex network of subsidiaries, many of which are publicly listed entities, including flagship company Hanwha Energy Corporation. Hanwha's operations are grouped under five major divisions: Manufacture/Construction, Distribution/Leisure, Finance/Trade, SI/Communication, and Sports. Manufacture/Construction includes Hanwha Corporation's explosives production; Hanwha Chemical Corporation, which produces PVC; Hanwha L&C, which produces PVC-based products; H-Pharm Company, which produces non-prescription drugs and health and beauty products; and Hanwha Advanced Materials, a partnership with Solvay, which produces materials for the automobile and other industries. Distribution/Leisure comprises the company group's Hanwha Stores, which operates the seven-store Galleria Department Store chain, and Hanwha Resort Company, the largest leisure company in South Korea. Since 2002, Hanwha has made a push into the financial services market, grouping its 51 percent stake in former state-owned insurance group Korea Life under its Finance/Trade division. The company also operates asset management and other insurance subsidiaries. The two remaining divisions, SI/Communication and Sports, include operations in the advertising and e-commerce sectors and ownership of the Hanwha Eagles professional baseball team. Hanwha, which emerged somewhat humbled from the economic debacle of the late 1990s, is led by chairman Kim Seung Yeon, son of the company's founder.
Success in the 1950s
The division of Korea following World War II, and especially after the outbreak of the Korean War in 1950, left South Korea in economic ruin. Most of the country's infrastructure, including the majority of its power plants and other important installations, lay in the region now claimed by communist North Korea. Yet the aftermath of the war also created an era of opportunity for a new breed of entrepreneurs.
Among them was Kim Jong-Hee, who recognized that the ongoing political tensions between North and South Korea made the development of a weapons industry a national priority. In 1952, Kim established a new company, Hyun Am, or the Korea Explosives Corporation, becoming the first and only privately held producer of explosives in South Korea.
Demand rose quickly, and the company began the expansion that was to rank it among the country's top ten companies by the end of the century. In 1955, the company added operations in Inchon, buying up the power plant operated by that city's Chosun Oil and Fat. By the end of the 1950s, Korea Explosives had added two new explosive types, nitroglycerin, starting in 1957, and dynamite, starting in 1958. The company also began producing fireworks.
The rebuilding of Korea's economy, as well as its civil and industrial infrastructure, began in earnest in the 1960s. Hyun Am's strong cash flow from its explosives business allowed it to become one of the driving forces behind the country's industrialization. By the mid-1960s, Kim started buying up other businesses. One of the company's first diversification moves came in 1964, when it acquired Shinhan Bearing Industrial Company, which later formed the basis of the group's Hanwha Machinery division.
Other diversified operations followed quickly, including an entry into petrochemicals market and the manufacturing of PVC and PVC-based products, starting in 1966, with the launch of Korea Hwasung Industrial Corporation. Under government insistence, however, that company was merged into the Korea Plastics Industrial Company in 1972, which led the company to begin developing other plastics holdings, such as Hankook Plastics in 1972 and Dongwon Industrial, acquired in 1974.
The company had by then entered the international trading arena, acquiring Taepyng Trading Corporation, later known as Golden Bell Trading Corporation, in 1966. In 1969, the group joined in the creation of Kyungin Energy Company, later renamed Hanwha Energy Corporation, which built and operated South Korea's sole privately held thermal power station. That operation soon developed into what the company described as its flagship business. In the meantime, Korea Explosives had begun exporting fireworks, especially to the Japanese market.
In the 1970s, Kim's range of business interests continued to expand as rapidly as the company itself. Over the next decade, the group entered a variety of industries, many of which had little to do with the its core explosives operation. Such was the case with its takeover of Daeil Dairy Industry Company in 1973 and the creation of Kimpo Ceramics Corporation the following year. The company also added shipping interests through the purchase of Sungwoon Trading Company in 1975 and made its first venture into the financial sector with the acquisition of Sungdo Securities Company in 1976. In that year, the company listed Korea Explosives on the Seoul Stock Exchange.
International Conglomerate in the 1980s
Kim Jong Hee died in 1981, and the chairmanship of the company was turned over to his son, Kim Seung Yeon, then just 29 years old. While his father had built up the company around a core manufacturing base, the younger Kim began transforming the family business into one of Korea's leading chaebols--known for their willingness to expand across a striking array of industries, as well as for their organizational and financial complexity. While the group continued to seek new manufacturing opportunities, such as its acquisition of Dow Chemical Korea in 1982 and the establishment of Hangyang BASF Urethane Corp in 1988, Hanwha now sought to impose itself on a variety of new business sectors.
Resorts development became a one of the group's first growth targets at the beginning of the 1980s, starting with the opening of the 768-room Seolak Hanwha Resort Hotel in 1981. The company's Hanwha Resorts began building a string of condominiums and resort complexes and soon grew to become Korea's leading leisure group.
In 1986, Hanwha entered the retail market as well, acquiring the Galleria Department Stores. That operation, targeting the high-end retail segment, grew into a chain of seven stores throughout Korea and formed the basis of the group's Hanwha Stores subsidiary. Later, Hanwha also began developing a discount retail format, Hanwha Mart, which grew into a nine-store chain by the end of the 1990s.
Yet any chaebol worthy of the name required still more diversified holdings, particularly in Korea's financial sector. The company launched its own bank, Hanwha Merchant Bank, and became the single largest shareholder in another, Chungkong Bank. The ownership of banks, a common practice among Korea's chaebols in the 1980s and into the 1990s, gave the group increased access to loans in order to fuel its ambitious growth. The company also founded Hanwha Investment Trust Management Company, entering the assets management field, in 1988.
In 1989, Hanwha purchased a newspaper, the Kyung Hyang Newspaper Company. By then, the company had also bought a baseball team, backing the formation of the Bingrae Eagles, later renamed the Hanwha Eagles, which became Korea's seventh professional baseball team.
In the 1990s, Hanwha's growth kept pace with Korea's emergence as both a regional and global economic powerhouse. Hanwha itself began to approach the top ranks of the country's corporations, finally cracking the top ten non-government owned companies by the middle of the decade. At this time, the company became implicated in the corruption that seemed to pervade South Korea's corporate and financial elite, and Kim Seung Yeon was jailed for 54 days in 1994 after being convicted for illegally smuggled foreign exchange currency worth nearly $6 million out of the country.
Restructured for the New Century
Hanwha entered the second half of the 1990s with high hopes for transforming itself into a high-technology contender. The company, which had already been involved in manufacturing telecommunications equipment, announced plans to step up its holdings in that sector. At the same time, it also entered the pharmaceuticals industry, acquiring Central Pharmaceutical Company, which formed the core of its new H-Pharm subsidiary in 1995.
The collapse of Korea's economy, and the implosion of its banking industry, brought Hanwha up short. Hanwha's policy of financing its unbridled expansion through debt had seen the company build up a debt-to-equity ratio of a whopping 1,200 percent. Both the Hanwha Merchant Bank and the Chungkong Bank folded, forcing a Korean government bailout. Hanwha itself now faced into a government-imposed breakup.
Kim rushed to restructure the company, selling off more than a dozen of its most profitable businesses, including its flagship Hanwha Energy and the manufacturing groups Hanwha Bearing and Hanwha Precision. At the same time, the company began consolidating its other holdings, while shutting down others, such as its newspaper operation in 1998, which had lost more than $350 million since becoming part of the group. Perhaps most painful for the Hanwha Group was the sale of its control of Hanwha Energy to Hyundai in 1999, which deprived the group of what it had come to consider as its core business. However, as Kim told the Korea Herald: "I was actually bitter about selling flagship companies, but I just emptied my mind of any desire for managerial rights, while turning a blind eye to all dignities as a tycoon."
By the end of the decade, Hanwha had completed its restructuring and now found itself held up as an example for the rest of Korea's chaebols. The company now set out to identify its growth objectives for the new century, targeting a return to the financial market, on the one hand, and a new role in the high-technology sector on the other.
As the Korean government prepared to privatize its Korea Life insurance business, Hanwha stepped up as a potential buyer, only to be rebuffed by the government. In 2002, however, the company tried again, raising its offer and agreeing to a three-year moratorium on arranging any part of Hanwha's financing through Korea Life. At last, in September 2002, the government agreed to sell a 51 percent stake to Hanwha for more than KW 1 trillion ($770 million), which beat out a rival bid from MetLife. The addition of Korea Life raised the group's ranking among Korea's top companies, giving it the eighth place position by the end of 2003.
Reborn as one of Korea's top financial services groups, Hanwha began development of the second wing of its growth strategy in 2001. In that year, the company, in partnership with the city of Daejon and the Korea Development Bank, launched construction of Daedeok Techno Valley. A grandiose scheme involving the construction of an entire city devoted to developing businesses in the high-technology sector, the company hoped that Daedeok would grow to rival California's Silicon Valley as a force in the world technology market. Construction was scheduled to proceed in five phases, with the final phase to be completed in 2007.
While a number of observers remained skeptical about the long-term viability of the Daedeok project, others had begun to question whether Hanwha truly represented a "new" kind of Korean company. In 2003, as the Korean government launched a crackdown on the corruption that remained rampant throughout the country's top corporations, Hanwha found itself accused of misrepresenting its profits by as much as $800 million in order to secure its Korea Life bid. That charge was followed by a fresh accusation, that Korea Life had agreed to rollover a pre-existing loan to Hanwha into preferential interest rates, violating terms of the acquisition agreement.
Corruption probes had by then resulted in the arrest of a number of top Korean business leaders, and the government's focus was said to be targeting Hanwha in the later part of 2003. Indeed, the company returned to the spotlight again in September of that year, accusing Hanwha of being part of a slush-fund scandal between Daewoo Construction and Kangwon Casino.
Despite its legal problems, Hanwha remained a respected force among the Korean and worldwide business communities. In April 2003, for example, Forbes magazine named the company among its highly coveted "A-List" of the world's best big companies. With annual sales of more than $6 billion and more than 50 years among Korea's top companies, Hanwha now turned to the future with its new look as a Korean financial and high-technology force.
Principal Subsidiaries: DAEDUK Techno Valley Company Ltd.; Dong Yang Department Store Company; FAG Hanwha Bearings Corporation; Galleria Shooting Team; Han Comm Inc.; Hanwha Advanced Materials Company Ltd.; Hanwha Chemical Corporation; Hanwha Chemical Corporation R&D Center; Hanwha Company/Trading; Hanwha Corporation; Hanwha Corporation/Explosive Division; Hanwha Development Company Ltd.; Hanwha Eagles Professional Baseball Club; Hanwha Engineering & Construction Company Ltd.; Hanwha Finance Company Ltd.; Hanwha Investment Trust Management Company Ltd.; Hanwha L&C Corporation; Hanwha Land Development Company Ltd./FS Business Part; Hanwha Machinery Company Ltd.; Hanwha Polymer Company Ltd.; Hanwha Resort Company Ltd; Hanwha S&C Company Ltd.; Hanwha Securities Company Ltd.; Hanwha Station Development Company Ltd; Hanwha Stores Company Ltd.; Hanwha Tourmall Company Ltd.; Hanwha VC Corporation; H-Pharm Company, Ltd.; Korea Independent Energy Corporation; Korean Life Insurance Company Ltd.; SHINDONGAH Fire & Marine Insurance Company, Ltd.
Principal Competitors: Samsung Electronics Corporation; SK Corporation; Hyundai Motor; POSCO; Kookmin Bank; SK Telecom.
- "Hanwha, Daewoo Accused of Stashing Secret Funds," Korea Times, September 19, 2003.
- "Hanwha Energy to Secede from Parent Group," Korea Herald, May 10, 2000.
- "Hanwha's Chaebol Ranking Rises to 8th," Korea Herald, September 25, 2002.
- "Hanwha Sets Stage for Decisive Restructuring," Korea Times, June 15, 1999.
- "Korea's Hanwha Faces Scrutiny," CNN.com, February 25, 2003.
- "7 Korean Companies Rank among World's Best," Korea Herald, April 12, 2003.
- Ward, Andrew, "S. Korea Accepts Offer for Life Assurer," Financial Times, September 24, 2002, p. 22.
- Yoo Cheong-mo, "Hanwha Chairman Kim Dubbed Restructuring Magician," Korea Herald, April 17, 1999.
- ------, "Hanwha Sets Sights on Financial Empire," Korea Herald, January 14, 2002.
Source: International Directory of Company Histories, Vol.62. St. James Press, 2004.