The "manufacturing paradigm" that has supported Korea's economy is shaking at its foundation. Mired in low growth, Korea's manufacturing sector faces a compound crisis of China's fierce pursuit and a global supply chain realignment. In particular, small and midsize manufacturing sites—the capillaries of industry and the roots of supply chains—are groaning under a "triple burden" of labor shortages, rising costs, and stagnant productivity, and are being pushed to their limits. Now the only breakthrough for survival is "AX (AI transformation)." Artificial intelligence (AI) is more than simply adopting technology; it is the last bastion that can breathe new life into aging factories and restart the growth engine of Korea's economy. ChosunBiz takes a close look at why small and midsize manufacturers standing at the edge of a cliff must stake their survival on AX, and maps out the "new growth blueprint" for Korea's manufacturing sector. [Editor's note]
Processing errors so minute they require a microscope to distinguish determine quality in the semiconductor, battery, and bio industries. In an era that demands precision to fractions of a hair's thickness, ultra-precision machining technology is a condition for survival. That is why 21segi, a corporations specializing in ultra-precision laser processing, is pushing beyond digital transformation (DX) into AI transformation (AX).
Hwang Jeong-seon, director of future strategy at 21segi, met with ChosunBiz at the company's headquarters in Hwaseong, Gyeonggi, on the 28th and said, "In ultra-precision processing, a tiny error leads to defects and losses," adding, "We must move from digital, which manages and controls processes based on on-site data, to a stage of process autonomy using artificial intelligence (AI)."
When 21segi was founded in 1996, it grew by designing and producing tools tailored to industrial site needs, with cutting tool tooling as its core business. But Chief Executive Kim Seong-hwan judged it insufficient as a future growth engine. China had emerged as a latecomer, forcing unit price competition down to 10-won increments.
After shifting to electrical and electronic and semiconductor components in 1998, the company pivoted in 2003 to developing ultra-precision processing technology leveraging today's laser characteristics. It also secured technology to drill holes smaller than a hair and machine precisely even in hard materials like metal or ceramic. Samsung Electro-Mechanics, SK Hynix, HANMI Semiconductor, and Toyota of Japan are major clients.
Concern over the company's competitiveness led to DX. After completing a Ph.D. program in industrial and systems engineering in 2017, Director Hwang joined 21segi and has overseen DX and AX. Starting with Hwang, 21segi began introducing a smart factory in 2018, creating an environment where it could identify which equipment was operating without going to the site. It digitalized the shop floor to check production flows in real time and enabled mobile visibility of order and contract status at a glance.
Hwang said, "On the floor, companies typically manage quotes and orders in enterprise resource planning (ERP) and hand off production to a manufacturing execution system (MES)." He added, "After DX, we integrated most functions into the MES—from quotes and orders to production progress, quality control, outsourcing management, and tax invoice issuance," explaining, "The biggest change is being able to see in real time what inventory is on the floor and how much."
After DX, 21segi's work efficiency rose 30%. Compared with the past, operating profit also increased by about 3% or more. Although less than a month has passed since the start of this year, performance improvements are clear, with orders for the company's main business of ultra-precision molds alone reaching 10 billion won.
Hwang emphasized, "Next is AI." He said, "Our goal is to make MCTs (Machining Center Tool), machine tools that automatically cut, drill, and finish metals or parts, intelligent by combining them with AI."
He continued, "Starting with our factory, we will distribute and expand MCTs that determine on their own whether a 'drill tip' for hole drilling is defective and replace it if there is a problem," adding, "Many companies use drill tips until they break, but when a drill tip breaks, it causes defects in the workpiece and larger losses. We will enable machining equipment to self-control with AI."
Previously, when AI detected a problem and sounded an alarm, people intervened to decide whether to replace parts or keep equipment running. Now the company is pushing process autonomy to a stage where AI analyzes in real time and takes immediate automatic action when problems occur. One MCT with the technology already implemented has been deployed to the floor. The company believes it can move to commercialization once an after-sales service system is in place. It is targeting development of smart laser equipment as a next-generation business model.
Hwang explained, "We will restructure the business by developing smart laser equipment that integrates AI," adding, "Initially, revenue will come from sales of parts and equipment, but we will shift to a recurring subscription revenue model to maximize corporate value."