Kolon Industries, SK Microworks to set up industrial film JV

South Korea’s major chemical materials producer Kolon Industries Inc. will team up with SK Microworks Co. to regain ground in the Chinese film producer-led global industrial film market with their industrial film joint venture.

According to sources in the investment banking industry on Tuesday, Kolon Industries signed a memorandum of understanding with SK Microworks, a polyethylene terephthalate (PET) film producer under Korean private equity investor Hahn & Co., to set up an industrial film developing and producing joint venture.

Both companies are in talks to spin off their mainstay film businesses, including those of industrial film, to set up the JV, estimated at about 300 billion won ($225 million), according to sources.

SK Microworks, the world’s No. 4 industrial film producer in terms of output, will manage the JV.

The two companies’ negotiations to set up the JV have gained traction as Kolon Industries, grappling with its money-losing industrial film business, has been actively seeking to restructure the business.

Hahn & Co., which acquired SK Microworks in 2022 for 1.6 trillion won, has been also looking into various options to expand its industrial film business.

TO FEND OFF CHINESE RIVALS

Kolon Industries produces various films, including optical, industrial, packaging, nylon and dry film, but it logged a cumulative operating loss of 61.9 billion won in its film business in the first three quarters of last year. It also posted a loss of 71.1 billion won in 2022.

SK Microworks reported 68.9 billion won in operating profit in 2021 on sales of 1.1 trillion won.

Given that the optical film market crowded with cheap Chinese products shows no sign of imminent recovery, other major Korean chemical materials companies such as SKC Ltd. and LG Chem Ltd. are reorganizing their businesses after divesting their film businesses to foster new growth engines. 

SKC has used the proceeds from the sale of its plastic film business to Hahn & Co. to expand its battery materials business.

Kolon Industries' collaboration with SK Microworks also comes at the right time for both companies.

Their partnership is expected to help them expand their presence in the global industrial film market while avoiding cutthroat competition that could cause damage to both.

Their JV is expected to invest mainly in the development of high-value-added materials such as eco-friendly materials to fend off Chinese rivals on the global stage.

The global industrial film market is forecast to grow to $55.8 billion in 2023 from $43.1 billion in 2022, according to the latest industrial film market report by global industry tracker Research and Markets headquartered in Dublin, Ireland.

Write to Ji-Eun Ha and Jun-Ho Cha at hazzys@hankyung.com

Sookyung Seo edited this article.