DH Global, a manufacturer of home appliances, introduces STENIQ, with innovative products such as dehumidifiers, freshness solutions, and portable ice makers.
The success of Korean conglomerates has had a positive trickle-down effect on domestic suppliers, providing them with growth momentum and core capabilities. However, in recent times, due to an increasingly saturated and competitive domestic landscape, it has become essential for enterprises to think globally to continue their growth trajectories. In order to achieve this goal, Korean companies will need to find their place in the global supply chain. What are the challenges and opportunities for you in the global supply chains? How can Korean companies benefit from the ongoing realignment of the supply chain, promoted by governmental policies such as the IRA and the CHIPS Act? bulk ascorbic acid
First and foremost, the biggest challenge will be establishing a competent overseas network. That's why we are trying to recruit more talented personnel to build a strong network of capable partners abroad. Secondly, as you rightly mentioned, we are sandwiched between advanced economies like Germany, the US, and Japan, and developing countries like China. We face challenges similar to those that advanced economies have already overcome, but the price competitiveness of developing countries remains a significant obstacle for us. In Korea, overall labor costs have soared, and the minimum wage is now higher than that of Japan. This increase in labor costs raises the overall manufacturing costs, from raw material procurement to intermediary processing, coating, molding, and semi-assembly.
If we cannot overcome this cost issue through technological innovation, we will struggle to compete with countries like China, where government subsidies provide a significant advantage. Technological advancements and innovation will be crucial for us to maintain and enhance our competitiveness in the global market. By leveraging our strengths in technology and innovation and aligning with global supply chain realignments promoted by governmental policies such as the IRA and the CHIPS Act, we can find new opportunities for growth and integration into the global supply chain.
From the point of view of reducing labor costs, we're talking about automation. However, when we talk about technological innovation in the home appliance sector, we also mean integrating novel applications into devices. Today, home appliances are becoming part of an in-home ecosystem through the utilization of digital technologies such as IoT and AI. How do you expect the home appliance market to evolve in the coming years? What new innovations are you expecting? Also, how is your company addressing the demand for these innovative solutions?
The future of consumer appliances will evolve in two significant ways. First, the line between mobility and consumer appliances will blur, leading to more portable home appliances. At home, robots will ultimately replace traditional consumer appliances. As more households experience loneliness and raise pets, robots will cater to these needs, serving as companions and assistants who can run errands. For senior citizens, robots will support their well-being and health. If you consider some of the companies we have merged with recently, they specialize in electronic parts and steering wheels. Steering wheels, which used to be simple, now have versatile functions.
I believe in the first principle of nature, the law of gravity: everything that is heavy will ultimately flow to the bottom. Although we currently occupy the premium segment of washing machines, fridges, and other consumer appliances, these products will not remain exclusive to advanced economies. They will eventually be enjoyed by consumers in China, Southeast Asia, and India. Building a high entry barrier in this field has its limits and side effects. Therefore, premium line-ups will ultimately be accessible not only to advanced economies but also to developing countries.
To sustain our business, we need to venture into future cash cow products by fostering technological innovation in our premium line-up. This is why we are also looking overseas. Additionally, merging home appliances with mobility is essential for remaining competitive. For our mid to long-term growth, we are focusing on robotic consumer appliances. We are channeling all our information technology and references into the robotics field. For example, a robotic company based in Pohang contacted us last week, and they will visit our company next week to discuss potential collaborations.
One interesting point about DH Global is that you have grown as a prevalent OEM/ODM for major names like Samsung and SK Magic. Additionally, you have developed your own brand, STENIQ, providing dehumidifiers, freshness solutions, and ice makers. What balance do you expect between your B2B and B2C businesses in the future?
As a company without a long track record or extensive history, we lack resources in terms of sales personnel and service capabilities. Since Korean MNCs dominate the automotive and consumer appliances markets, we and other small and mid-sized enterprises function as cooperative partners. However, if we venture into the B2C market where conglomerates are already active, we become competitors rather than partners. Therefore, the B2C field we are entering comprises areas where Korean MNCs have not extended their reach. This includes consumer appliances they are not focusing on.
There are niche markets where Korean MNCs strategically see potential and try to enter preemptively. However, they usually target already mature markets. Since we venture into niche markets first, we sometimes propose to Korean MNCs, saying, “This market has potential. Would you like to cooperate with us?” They can either pursue ODM opportunities or conduct the business independently.
Mid-sized companies in Korea face significant challenges due to the unique corporate culture and hierarchy. First, Korean MNCs lead the market and trends because they can bombard consumers with commercials featuring celebrities during primetime slots. We lack the capital and marketing capabilities to compete on this level. Korean SMEs or mid-sized companies cannot match Korean MNCs in terms of workforce or capital. Therefore, we focus on niche markets and propose collaborations to MNCs, who can then expand these markets exponentially.
Korean MNCs spearhead trends and culture, presenting one of the biggest challenges for Korean mid-sized companies. Additionally, Korean mid-sized companies are not on an equal playing field with MNCs. When mid-sized companies try to enter a market with sufficient capital and expertise, mass production becomes challenging. MNCs may see mid-sized companies as competitors rather than cooperative partners. Although we try to complement each other by holding seminars for MNCs to adopt new culture, technology, and methods, once they see us as competitors, we become isolated. Our strategy focuses on cooperating with Korean MNCs where possible while venturing into niche markets they have not yet entered.
The trickle-down effect you mentioned is evident through years of experience. Korean SMEs, who have worked as primary or secondary vendors for Hyundai Motors or Kia Motors, do not need to undergo demanding administrative processes to be registered as primary vendors for other global companies like Volkswagen. Their quality and systems have already been proven, showcasing the trickle-down effect we are enjoying. Hyundai Motors is also recommending this approach.
You mentioned focusing on niche applications and fields. How does that translate into STENIQ’s strategy? STENIQ is your own brand of products encompassing a range from freezers to dehumidifiers and ice-making machines. Looking ahead over the next two to three years, which of these product categories do you believe will be most crucial for growth and generate the highest revenue?
When considering modern home appliances, I foresee future conditions may not necessarily favor us, as we are transitioning towards the convergence of mobility and alliances. Traditional home appliances that we currently manufacture may not provide the same substantial added value as they have in the past.
As you mentioned, modern home appliances may not support the company’s growth as strongly as before. How do you see your portfolio evolving in the future? What new developments are you pursuing? How are you expanding your capabilities to respond to new applications?
First, in terms of B2B, we will continue to develop our existing OEM and ODM business with Korean MNCs while preparing for future opportunities. We are proactively contacting more prestigious Korean MNCs to offer OEM and ODM services for new product lines. Given the limited scope of the Korean domestic market and the trend of consumer appliances and automotive industries moving overseas and relocating factories, the purchasing power of Korean customers is gradually decreasing. This presents a crucial turning point for the Korean economy. In the past, the manufacturing industry led the Korean economy with a ripple effect on other sectors. However, this dynamic has shifted, leading to a pivot towards services and self-employment, creating a more challenging economic environment.
In terms of B2C, we aim to enter markets where Korean MNCs have not yet established a presence. Beginning this year, we plan to expand into global markets by establishing an overseas sales team.
You mentioned actively developing capabilities in overseas markets. While you have connections in Europe and China, which regions and countries do you believe will drive your future growth in the B2C business?
I'd like to clarify that we haven't yet directly penetrated into Europe or America. Regarding our B2C products, I categorize them into two types: glass door merchandiser and portable icemakers. For glass door merchandiser, we aim to target the larger American market where we have secured competitiveness in quality & performance. As for portable icemakers, given their universal appeal, we plan to focus particularly on Southeast Asia, where there is increasing demand due to the perpetual heat. Additionally, we're observing significant demand in the Americas as well.
We saw in our research that you became president this year. Is there an ambition or objective that you've set for yourself that you want to achieve during your tenure?
I have a 30-year plan to elevate our company to become the fifth largest in Korea. While achieving this during my tenure may seem ambitious, my goal is to position our company among the top 10 largest companies in Korea. In 2011, our revenue was nearly zero, but since then, we have experienced exponential growth. Even if I cannot fulfill this goal within my tenure, I aim to instill this spirit and vision in the next generation of executives.
At the end of the interview: For more details, explore their website at: http://www.global-dh.com/
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