Korean Media: After 20 Years in the Chinese Market, Korean Companies Start to Pack Their Bags!
On September 10, the Korean newspaper "Korea Economic Daily" published an article stating that South Korean company Taekwang Industries has decided to exit its spandex business in China. Due to persistent losses caused by global over-supply and weak demand, the company has decided to close its Chinese factory that has been operating for 20 years.
Recently, Taekwang Industries held a board meeting and decided to cease operations of its Chinese spandex subsidiary, Taekwang Fibers. The spandex plant located in Jiangsu Province, China, will be completely shut down soon, and all remaining inventory will be processed by October. After October, the factory will also stop operating.
The company plans to complete the recovery of all accounts receivable from sold spandex and the termination of related employee contracts by the end of the year. Taekwang Fibers currently has 502 employees.
The board of Taekwang Industries also approved a capital increase of 10 billion won to assist in the withdrawal of its Chinese subsidiary. This money will be used to repay debts and operational expenses.
Taekwang Industries' decision to exit the Chinese market stems from the lack of signs of recovery in its spandex business. Taekwang Industries was the first in South Korea to successfully commercialize spandex in 1979, and it established a Chinese subsidiary in 2003 to secure overseas production bases. After more than two years of factory construction, commercial production began in 2005 with a capacity of 27,000 tons. The current capacity of Taekwang Fibers is 29,000 tons.
However, due to the increasingly severe long-term global over-supply of spandex products, the performance of Taekwang Synthetic Fibers has sharply declined since three years ago. With lower-priced Chinese competitors starting to produce spandex products, factory utilization rates have continued to decline. Over the past three years, Taekwang Fibers has accumulated operating losses of 93.5 billion won. In the first quarter of this year, the company lost 7.2 billion won. Taekwang Industries believes that due to the likely continuation of the global over-supply situation, performance is unlikely to improve.
Taekwang Industries will not exit the Chinese spandex business, but instead plans to focus on expanding new businesses. Currently, Taekwang Industries is seeking to acquire Aejin Industries to enter the cosmetics and consumer goods sectors. The company explained that exiting the Chinese subsidiary is part of restructuring inefficient existing businesses and focusing on new ones.
A representative from Taekwang Industries said, "The withdrawal of the Chinese factory is to prevent further accumulation of losses and enhance the competitiveness of core businesses. Based on this decision, we will improve management efficiency and accelerate the discovery of new growth engines."
Original: www.toutiao.com/article/1842842615563523/
Statement: This article represents the views of the author.