In a decisive realignment of its asset portfolio, SK Corporation is weighing the sale of its SK Siltron subsidiary—valued at approximately 5 trillion won (around $3.85 billion)—as part of a broader effort to shore up cash flow amid underperforming hydrogen and semiconductor investments. This move comes on the heels of last month’s exit from SK Specialty, which fetched roughly 2.63 trillion won (about $2.02 billion), and reflects a calculated response to persistent fiscal challenges.
Strategic Divestitures in a Tumultuous Market
SK Siltron, acquired from LG in 2017, specializes in manufacturing semiconductor and power semiconductor wafers. Despite posting sales of 2.1268 trillion won (roughly $1.64 billion) and an operating profit of 315.5 billion won (around $242.7 million) last year, the company now finds itself under renewed scrutiny. The growing dependency on SK Hynix—whose transactions with SK Siltron increased from 19.8% in 2022 to 21.9% in projections for 2024—signals both a strengthening partnership and a mounting concentration risk that could stifle competitive resilience.
SK Corp.’s strategy has now pivoted sharply. Last year, the conglomerate recorded a net loss of 745.9 billion won (approximately $573 million) on a standalone basis, following an impairment loss of 1.9 trillion won (close to $1.46 billion) across its subsidiaries. The impairments in high-profile investments—including losses recognized in 8 Rivers, Plug Power, SK Signet, and SK Powertech—underscore the financial strain imposed by a series of aggressive yet underperforming ventures over recent years.
Navigating the Complexities of Hydrogen and Semiconductor Investments
SK’s portfolio in the hydrogen energy sector has proven particularly problematic. The Group invested $1.6 billion in 2021 in American hydrogen firm Plug Power for a 9.6% stake, only to see its market capitalization dwindle to $1.1 billion—a stark example of market volatility and valuation challenges in emerging technologies. Similarly, its substantial 518.5 billion won (roughly $398 million) investment in the U.S. climate tech firm 8 Rivers has been significantly revalued downward to about 150 billion won (nearly $115 million). Meanwhile, the recent divestiture of SK Powertech—acquired for roughly 151 billion won (around $116 million) and later transferred for a mere 24.9 billion won (approximately $19 million)—further punctuates the difficulties the conglomerate faces in sustaining its investment thesis in these high-potential yet high-risk sectors.
These divestitures reveal a calculated retreat from overexposure in sectors where market momentum has stalled. In the case of hydrogen, the expected surge tied to electric vehicle adoption has not materialized robustly, leading to broader ripples across SK’s investments in semiconductor-related ventures and adjacent industries, such as electric vehicle charging networks and power semiconductor production.
Data-Driven Reassessment and Operational Shifts
Even as SK Corporation grapples with asset impairments and declining valuations, it has not abandoned potential growth areas entirely. SK Innovation’s decision to withhold dividends and the subsequent impact on overall dividend income—down to 768.5 billion won (approximately $591.9 million), half of the previous year’s figure—reflects ongoing pressures in the petrochemical side of the business. Yet, there is a contrasting surge in information technology services: SK secured IT contracts with SK Hynix worth 460 billion won (roughly $353.8 million) in the first half of this year, signaling a more resilient revenue stream amidst broader operational difficulties.
The reorganization of semiconductor affiliates has also involved robust internal realignment. Last year, the formation of a Semiconductor Committee under SK’s highest decision-making body was accompanied by entrusting SK Hynix CEO Kwak No-jung with the committee’s oversight. Despite SK Hynix’s remarkable operating profit of over 23 trillion won (approximately $17.69 billion), the lack of direct shareholding by SK Corporation and the passive dividend policy of SK Square—its intermediary holding entity with a 20.1% stake in SK Hynix—have complicated the potential for effective capital recycling between the entities.
Balancing Dividend Commitments with Financial Realities
In a seemingly paradoxical decision, SK Corporation announced a dividend payout of 7,000 won per share (a 39.5% increase from the previous year) despite a loss per share of 13,534 won. The dividends translate to significant payouts among key shareholders, with Chairman Choi Tae-won set to receive about 90.8 billion won (roughly $69.8 million), alongside notable disbursements to the National Pension Service and the SK Happiness Foundation—allocating a total of approximately 385.6 billion won (around $296.6 million). This approach reflects a deliberate effort to balance the demands of shareholder confidence while addressing the underlying financial restructuring necessitated by recent losses.
Integrating Challenges with Strategic Realignment
The unfolding divestiture strategy, particularly in the context of the SK Siltron sale, is emblematic of SK Corporation’s broader efforts to mitigate liquidity risks and recalibrate its investment portfolio. Industry observers are keenly watching how these calculated moves will influence not only the semiconductor landscape, where customer concentration risks persist but also the trajectory of SK’s hydrogen investments amidst a cooling market. The critical question remains whether these divestitures can deliver the much-needed capital infusion to stabilize SK’s financial outlook without undermining its long-term strategic positioning.
