[The Editors' Verdict] Economic Solutions Found in HD Hyundai Electric's Record Performance Bonuses

Recently, in the power equipment industry, HD Hyundai Electric's upcoming performance bonuses for its employees have become a hot topic. The bonus amount is 1200% of the base salary, even higher than SK Hynix's (1000%) last year's record-breaking performance. When rumors about HD Hyundai Electric's bonuses circulated on the anonymous forum Blind, even executives at competing companies became tense. A senior official from a rival company shared that they were at a loss due to employees demanding, "We want bonuses as much as HD Hyundai Electric."

The large bonus scale is naturally due to strong performance. According to financial information provider FN Guide, HD Hyundai Electric's sales last year were projected to reach 3.5155 trillion KRW, with operating profit at 713.2 billion KRW. Net profit for the year was expected to more than double from the previous year to 531.8 billion KRW. Over the past year, the stock price rose more than 370%, ranking first among KOSPI-listed stocks. Orders for transformers are fully booked until 2030. It is no exaggeration to say it was the best year ever.

The strong performance of HD Hyundai Electric was largely influenced by the global wave of artificial intelligence (AI). With increased power demand, infrastructure including power equipment enjoyed a boom, and the company's main product, ultra-high voltage transformers, began to attract attention, especially in the U.S. market. Inside the company, the reaction was that "just 5 to 6 years ago, this was unimaginable."

HD Hyundai Electric was established in 2017 through the spin-off of Hyundai Heavy Industries. It is the successor of the Electrical and Electronics Business Division. The company did not show strong performance immediately after the spin-off. In fact, it was far from the current boom. Like other similar companies, it heavily depended on sales in the Middle East. It once ranked first in the transformer market in Saudi Arabia. However, as Middle Eastern countries slowed investment in power equipment, performance deteriorated. Operating losses of 100.6 billion KRW and 156.7 billion KRW were recorded in 2018 and 2019, respectively. The cumulative deficit over two years exceeded 250 billion KRW.

The dramatic turnaround for HD Hyundai Electric came after 2020. The market largely attributes this to restructuring and revived orders. On a more fundamental level, the concept of ‘energy security’ that emerged amid U.S.-China tensions cannot be overlooked. This concept emphasizes the need to consider economic feasibility on the foundation of stable energy supply. Transformers play a key role in energy security. In the U.S., there is a growing trend to restrict the use of Chinese-made transformers for security reasons. U.S. power experts believe these devices could be manipulated or shut down by external forces, potentially causing major social disruption. This is why Korean-made transformers, including those from HD Hyundai Electric, are doing well in the world’s largest market, the U.S. Last year, Vice Chairman Jo Seok of the company stated in a lecture that "as deglobalization accelerates, energy security is rapidly becoming a matter that determines national survival."

The strong performance of K-power equipment makers is expected to serve as a good example for other industries fiercely competing with Chinese products. Chinese-made goods have permeated many aspects of our lives, from basic materials to batteries, electric vehicles, and home appliances. There is also anxiety about when and how our information might be compromised. The uncertain start to 2025 will see the global discourse on ‘security’ become a breakthrough for us.