POSCO Engineering & Construction will withdraw from the modular business. The subsidiary responsible for the modular business, POSCO A&C Architectural Office, has decided to sell its related institutional sector to a specialized company. With major construction companies expanding their investments in the modular business, it is an unusual decision for a large construction company to declare its withdrawal from this sector.
The company that sold its institutional sector is a corporation that started the modular business in South Korea in the early 2000s and currently collaborates with Samsung Electronics in the AI home appliance sector. Modular construction is a smart construction technique that involves the pre-manufacture of standardized modules such as walls, windows, plumbing, and bathrooms in a factory, then transporting and assembling them on-site to complete the building.
According to the Financial Supervisory Service and POSCO Engineering & Construction on the 26th, the subsidiary POSCO A&C Architectural Office held a board meeting and a shareholders' meeting on the 20th, deciding to transfer all operations related to modular production and installation to the specialized modular company Yoochang E&C. They plan to sell related assets and personnel for 5 billion won. The transfer date is scheduled for June 21.
Regarding the sale of the institutional sector, POSCO Engineering & Construction noted that it is for 'asset efficiency for concentrating on core businesses.' A POSCO Engineering & Construction official said, 'The modular business is a decision to temporarily withdraw and focus on existing methods of business.' POSCO A&C Architectural Office is a subsidiary in which POSCO Engineering & Construction holds a 100% equity stake. Its main operations include building design, construction supervision, and metallic structure window construction.
Major large construction companies are expanding their modular businesses. Samsung C&T signed a memorandum of understanding with the Saudi Arabian sovereign wealth fund (PIF) in January 2023 and agreed to build modular production facilities in Saudi Arabia through joint investment. They aim to apply modular construction methods to part of Saudi Arabia's future city development project, the 'Neom City Project.'
GS Engineering and Construction has been engaging in modular business since 2020, establishing subsidiaries for precast concrete manufacturing, 'GPC,' and a wooden modular specialist, 'XiGEIST.' Last month, they completed a mock-up of multi-family housing built with modular methods at the GPC factory site in Eumseong, Chungbuk, and finished performance validation for residential capabilities. Hyundai Engineering also completed a 13-story 'Yongin Yeongdeok Gyeonggi Happy Housing' using modular methods in Yongin, Gyeonggi Province, in June 2023.
In the construction industry, it is believed that POSCO Engineering & Construction has judged that the modular business, which requires significant initial investment costs, currently offers no practical benefits.
Seo Jin-hyung, a professor at Kwangwoon University's Department of Real Estate Law, said, 'While modular construction is a pioneering method, it is not universally used in the market, and there is not enough demand to reduce costs through economies of scale.' He added, 'Costs are actually higher, and the level of technical completeness is low, so it seems that POSCO Engineering & Construction has made a strategic choice.'
Lee Eun-hyung, a researcher at the Korea Construction Policy Research Institute, stated, 'Currently, there is no guarantee that construction costs can be reduced compared to traditional on-site pouring methods, and transporting modules is quite difficult, making it challenging to reduce labor costs. This is why some construction companies are abandoning this business.'
Meanwhile, Yoochang E&C, which is acquiring the modular business sector from POSCO Engineering & Construction, was established in 1984 and is involved in the production and sale of construction materials, hardware construction, and modular production. In 2003, it completed the expansion of Sin-Gi Elementary School, located at 1274 Sinjeong-dong, Yangcheon-gu, using modular methods, the first in South Korea.
In February, they also signed a memorandum of understanding with Samsung Electronics. Through this agreement, both parties decided to apply approximately 4,200 types of Samsung Electronics' AI home appliances including system air conditioners, signage, refrigerators, and washing machines to Yoochang E&C's modular buildings. SmartThings Pro is a solution that can integrate and manage various devices and systems, including AI home appliances.