Hyundai Heavy to reposition as tech platform for vessels

Hyundai Heavy Industries Group is making big steps forward to transform itself as a platform business in the global shipbuilding sector.

According to the industry on Aug. 10, the group’s maintenance arm Hyundai Global Service Co. has been lately focusing on the development of artificial intelligence (AI) software systems such as smart ship solutions and vessel lifecycle solutions. The systems, which essentially will be the brains of the vessels, can analyze big data on the ship’s operation and components to ensure efficient and safe navigation.

Hyundai Global Service was established in 2016 by spinning off the after-sales service and maintenance units of Hyundai Heavy Industries Holdings. After standing alone as a separate entity, Hyundai Global Service made quick entries into new business areas such as remodeling the vessels into eco-friendly, low-carbon ships.

Thanks to the strengthened regulations on carbon emissions and growing demand for eco-friendly remodeling services, the company was able to quadruple its annual revenue in just three years, from 238.1 billion won ($206.4 million) in 2017 to 1.09 trillion won ($944.7 million).

Industry sources highlight that the transformation of Hyundai Global Service, from a mere maintenance company to a leader in eco-friendly remodeling, is being driven by the group’s heir apparent and senior vice president Chung Ki-sun. The sources note that Hyundai Global Service is the group’s first affiliate that Chung himself has not only led the spin-off process but has also been responsible for its management.

Chung’s next focus to further grow the company’s presence in the tech-oriented segment of the shipbuilding sector is smart ship solutions. The AI-based solutions will offer an evolved vessel operation system to the clients to provide information regarding optimal ship routes and replacement periods for ship components.

Industry analysts say that Hyundai Heavy Industries Group, whose business focus had been limited only to building ships, is now strengthening its foothold in other stages of the ship’s lifecycle such as operation, maintenance, repair and remodeling.

The analysts also highlight that the establishment of another affiliate, Avikus Corp., by the group at the end of 2020 should be interpreted taking such a business context into account. Avikus is a specialized unit that focuses on the development of autonomous ship navigation technologies.

“Basically, what Hyundai Heavy is doing now is transforming itself from a manufacturing company to a tech platform for ships. Such attempt is the first of its kind in the industry,” said a South Korean industry official.

Chung Ki-sun has also led the group’s key fundraising efforts recently. In February, Chung led KKR’s 646 billion won ($560 million) investment to purchase shares of Hyundai Global Service. Hyundai Global Service could receive a high valuation at 1.7 trillion won ($1.47 billion) by KKR in making the investment, by successfully positioning itself as a tech company rather than a traditional ship manufacturer.  

Chung and Korea Investment Corporation (KIC) in March also signed a deal to co-invest up to 1 trillion won ($867 million) in global sector-leading firms in AI, robotics, digital healthcare, autonomous shipping and hydrogen fuel cells.

“Hyundai Heavy Industries Group is aiming to obtain revaluation from the market as a tech company, potentially through M&As of software companies that will strengthen Hyundai Global Service’s capabilities,” said an investment banking official.  

Write to Jung-hwan Hwang at jung@hankyung.com
Daniel Cho edited this article.