November 22, 2024

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SK Group's headquarters building in Seoul. (SK)

Endless guesses are made over who will win the race to the White House between former US President Donald Trump and current Vice President Kamala Harris, but both look likely to bolster the country's protectionist measures to boost the US' domestic industry.

Against this backdrop, South Korea's second-largest conglomerate SK Group is beefing up its US offices to elevate negotiating power in the all-important market, where it has been spending heavily to secure a firmer footing for its key businesses, including chips, batteries and energy.

Earlier this year, SK Group established SK Americas by combining regional offices there as part of its renewed efforts to bolster government relations and operational networks.

"Regulation changes in the US have a big impact on our businesses. We need to keep up with the changes in time and let our affiliates know to come up with measures to reduce risks," an SK official said.

"Our business in the US is growing bigger and bigger, so the expansion is only reasonable.”

Revamped US control tower

SK set up SK US, the former US control tower, in 2001, but it was considered a latecomer when it comes to government relations compared to its chaebol rivals such as Samsung Electronics, Hyundai Motor and LG Electronics, all of which had already poured resources into the crucial market for their home appliances and cars.

In recent years, however, SK has become one of the big spenders in the US not just on its massive chip and battery facilities but also on its lobbying activities there.

SK has continued to increase lobbying spending in the US. According to OpenSecrets, a Washington-based nonpartisan organization that tracks lobbying in US politics, SK Americas and SK hynix America together spent $2.54 million in the first half of this year.

In 2023, SK hynix recorded the highest lobbying spending of $5.27 million, more than doubling from $2.35 million in 2019. Its number of lobbyists there also increased from 15 to 37 during the same period.

SK Americas operates two offices in Washington and New York, respectively. Most of the details of their operations stay under wraps.

According to industry sources, most of the employees are Americans or locally hired, considering they are required to be aware of US political and industrial dynamics. Sources say some Korean officials are also relocated to the US to be trained in the local media landscape and government relations.

From left: SK Innovation CEO Chey Jae-won; SK On CEO and SK Americas CEO Yu Jeong-joon (SK Supex Council)

SK veteran at the helm

Despite the localization strategy, at the helm of the revamped US control tower is an SK veteran Yu Jeong-joon, SK Group’s vice chairman who doubles as CEO of SK On, the group’s battery-making unit. Yu is considered a US specialist within SK as he has served in diverse roles overseeing overseas business operations across affiliates.

Prior to joining SK in 1998, Yu started his career as an accountant at Deloitte in New York in 1987 and moved to work at McKinsey & Co. and LG Engineering and Construction.

At SK, Yu servedin several key positions, including as president of SK Energy, CEO of SK Lubricants, and the chief of SK G&G, a task force team responsible for exploring new growth drivers in global markets.

In March 2022, Yu, then SK E&S CEO, also doubled as the chief manager of government relations in the US. This year, he took office to lead both SK On and SK Americas.

Along with Yu, Chey Jae-won, Chairman Chey Tae-won’s younger brother and SK Innovation CEO, also plays a key role in expanding the group’s US relations. He majored in physics at Brown University, and earned two master's degrees -- at Stanford University in materials science and at Harvard University in business administration.

Having started his career at SKC, the materials and parts-making affiliate, in 1996, Chey has served in various posts, including SK On CEO and the group’s global committee chief.

Bolstering readiness

The key priority of the US teams is maximizing regulatory incentives and subsidies secured under the Biden administration even after a leadership change, while tackling business risks from the ongoing Washington-Beijing rivalry.

SK On has several battery plants for electric vehicles either operating or under construction in the US, seeking to benefit from the Inflation Reduction Act that offers up to $7,500 tax credits per purchase for EVs that are locally assembled.

SK hynix is also investing some $3.87 billion to build an advanced packaging facility in Indiana to receive up to $450 million in subsidies, together with a low-interest loan of $500 million, under the CHIPs Act, another signature policy of President Biden to boost domestic manufacturing.

Experts say SK should ramp up negotiating power in the US, especially in the case of Trump’s return as the former president hints at reviewing IRA and other key policies during the Biden era. Any changes in China policy is also expected to have a great impact on SK and other Korean firms doing business in China.

"The upcoming elections in the US is a critical event that will decide the direction and speed of changes in geopolitics and supply chains," said Kyung Hee-kwon, an associate research fellow at the Korea Institute for Industrial Economics and Trade.

“Whoever wins the election, the overall business environment would not be favorable for Korean companies. Because radical changes could occur to challenge individual companies and industries, they need to revamp risk management capabilities.”

By Jo He-rim (herim@heraldcorp.com)