Hyosung Group Chairman Cho Hyun-joon is participating in the board of directors of Hyosung Heavy Industries, which is intensifying the focus on the company's electric equipment business. Recently, Hyosung Heavy Industries has been expanding its local factories to strengthen its attack on the U.S. market amid a boom in the American electric equipment market. However, there are observations that the National Pension Service's concerns regarding Chairman Cho's concurrent positions will act as a burden.
According to industry sources on the 18th, Hyosung Heavy Industries will present an agenda for the new appointment of Chairman Cho as an inside director at the regular shareholders' meeting on the 20th. This will be the first time since the human division in 2018 that Chairman Cho participates in the board of Hyosung Heavy Industries. The company explained that the reason for recommending Chairman Cho is to strengthen responsible management by leading proactive investments and expanding into new electric markets.
Industry sources are reporting that Chairman Cho will lead decision-making regarding the expansion of investments in the electric equipment business by participating in the board of Hyosung Heavy Industries. The company's electric equipment business, centered around the U.S., has been smoothly progressing, increasing its significance and presence within the group. Hyosung Heavy Industries recorded its largest-ever sales last year due to the buoyancy in the institutional sector related to electric equipment, despite a downturn in construction activity.
With increasing demand in the U.S. electric equipment market, forecasts suggest that this year's performance will surpass last year's. This is due to expanded investment in artificial intelligence (AI) data centers by large American IT companies and increased demand for the replacement of aging electric equipment, thereby enlarging the scale of the U.S. business. As of the end of last year, Hyosung Heavy Industries' order backlog in the institutional sector reached 9.2 trillion won, a 57% increase compared to a year earlier.
Since June of last year, Hyosung Heavy Industries has been expanding its test and production facilities at the ultra-high voltage transformer factory in Memphis, Tennessee. The Memphis plant was acquired from Japan's Mitsubishi Heavy Industries in 2020. Once the expansion is completed next year, the transformer production capacity at the Memphis plant is expected to increase from 130 to 200 units annually. Additional expansion investments are also reportedly under consideration. The domestic ultra-high voltage transformer production capacity is also expected to increase by about 10% after the enhancement work at the Changwon plant is completed in the first half of the year.
There are also concerns regarding Chairman Cho's concurrent positions in affiliated companies. Recently, the National Pension Service's Fund Management Headquarters stated that it opposes the appointment of Chairman Cho as an inside director concerning the exercise of voting rights of Hyosung Heavy Industries. The National Pension Service holds 12.24% equity in Hyosung Heavy Industries as of the end of last year. They cited that Mr. Cho's excessive concurrent positions make it difficult to fulfill fiduciary duties and have a history of damaging corporate value and infringing on shareholder rights.
The agenda for the appointment is likely to pass, as the largest stakeholder, Hyosung Co., holds nearly half of the equity in Hyosung Heavy Industries. However, there are also observations that the National Pension Service’s opposition to Hyosung Group’s agenda in recent years poses a burden on management. Last year, the National Pension Service opposed the appointment of Chairman Cho as inside director of Hyosung Co. and Hyosung TNC due to a history of damaging corporate value.