[From the Top Engineer] ① HD Hyundai Elec CTO "Transformers That Withstand Explosions Are the Key to Being No.1 in the US Market"

Lee Chan-joo, CTO of HD Hyundai Electric, Interview
"Diversifying Transformers to Meet US Customer Demand Was the Key to Success"
Proactively Responding to the Booming Power Equipment Market
Strengthening Competitiveness by Establishing Direct Production Bases in the US

Editor's NoteSouth Korea's industry is facing a comprehensive crisis. The surge in raw material prices, the restructuring of global supply chains, and the US-China trade conflicts have compounded, worsening the business environment. The key to overcoming this crisis ultimately lies in technology. Technology is the lifeline and the value of existence for companies. This is also why companies are placing greater emphasis on the role of Chief Technology Officers (CTOs). CTOs have established themselves not only as developers of new technologies but also as strategists who analyze changing markets and present future visions for their companies. Asia Economy met with CTOs of major domestic companies to hear about the core technologies and differentiation strategies that each industry is focusing on. Through the technology strategies of leading companies, we seek ways to enhance the competitiveness of our industry and create future value.

HD Hyundai Electric received the '1 Billion Dollar Export Tower' award last year, the first in the domestic power equipment industry. Exports to North America were a decisive factor in surpassing the record $1 billion mark. This achievement was supported by unrivaled technology in the ultra-high voltage transformer field, capable of targeting the demanding US market.

Lee Chan-joo, CTO (Chief Technology Officer) and Executive Director of HD Hyundai Electric, is giving an interview to Asia Economy on the 11th at the HD Hyundai Global R&D Center in Seongnam-si, Gyeonggi-do. Photo by HD Hyundai Electric

Lee Chan-joo, Chief Technology Officer (CTO, Executive Director) of HD Hyundai Electric, said in an interview with Asia Economy on the 11th at the HD Hyundai Global R&D Center in Seongnam, Gyeonggi Province, "Due to the unique characteristics of the US market, which requires exceptional technology for anti-terrorism and cybersecurity, we have developed the capability to produce ultra-high voltage transformers with various voltages and capacities that customers demand." Ultra-high voltage transformers are devices that convert electricity generated at power plants to very high voltage levels to efficiently transmit it over long distances. By increasing voltage, the same power can be sent with lower current, significantly reducing power loss.

Especially for critical facilities like data centers, power outages caused by terrorism or accidents are absolutely unacceptable. Therefore, technology that maximizes explosion-proof performance to safely withstand transformer explosions or accidents is essential. If an explosion occurs inside the transformer, the technology must allow it to endure internally and then gradually reduce pressure, safely releasing it through connected valves. Thanks to this advanced technology, HD Hyundai Electric has expanded orders by custom-manufacturing transformers with various specifications desired by US customers.

Ultra-high voltage transformer produced by HD Hyundai Electric. HD Hyundai Electric is leading the North American ultra-high voltage transformer market share. Photo by HD Hyundai Electric

Unlike competitors who chose to acquire existing facilities instead of building new manufacturing plants, HD Hyundai Electric has directly established manufacturing facilities in the US from the beginning.

According to Bloomberg New Energy Finance (BloombergNEF), a market research firm specializing in renewable energy, HD Hyundai Electric is ranked first in production capacity for large power transformers (LPT) in the US. It is evaluated as having the capability to quickly respond to rapidly increasing market demand through large-scale investments.

The power equipment market is experiencing a boom due to the activation of the artificial intelligence (AI) industry and the surge in data center construction. According to Global Market Insights, the US transformer market size is expected to grow from $1.2 billion in 2024 to $2.6 billion by 2034, at an average annual growth rate of 7.7%. Especially, 70% of all transformers in the US are reaching replacement periods, continuously increasing market demand, presenting an excellent opportunity for HD Hyundai Electric.

In line with these market trends, HD Hyundai Electric is expanding technology and production investments. North American sales, which were 425.9 billion KRW in 2022, surged to 1.0062 trillion KRW last year. The regulation of Chinese products in the US due to cybersecurity issues also worked favorably for Korean companies. HD Hyundai Electric is expanding its local factory in Alabama to prepare for tariffs and political risks.

HD Hyundai Electric's management strategy is to increase technology investment even more during boom periods to secure future technologies. The CTO said, "We are not complacent with current orders and sales growth but are significantly increasing research and development (R&D) investments in preparation for the future." The company recorded its highest-ever sales of 33.223 trillion KRW last year and invested about 1 trillion KRW, approximately 3% of sales, in R&D. The strategy is to establish a sustainable growth foundation through proactive investments in future technologies as well as factory and equipment investments reflecting market conditions.

Lee Chan-joo, CTO (Chief Technology Officer) and Executive Director of HD Hyundai Electric, is giving an interview to Asia Economy on the 11th at the HD Hyundai Global R&D Center in Seongnam-si, Gyeonggi Province. Photo by HD Hyundai Electric

Particularly, the company is focusing on 'eco-friendliness' and 'high efficiency.' Preparing to enter the European market following North America, it is concentrating on developing technology to replace the existing sulfur hexafluoride (SF6) insulating gas with eco-friendly substances to meet strict environmental regulations. Replacing SF6, which causes greenhouse effects 23,000 times greater than carbon dioxide, with plant-based or synthetic insulating oils is not a simple gas substitution but requires redesigning the transformer. The company plans to quickly secure this technology as a core competitiveness for entering the European market.

HD Hyundai Electric is also developing power conversion technology using silicon carbide (SiC) semiconductors. This technology efficiently processes the same amount of power and is essential for converting and storing renewable energy such as solar and wind power into electricity.

The company is developing a 'high-performance power conversion device (inverter)' using this technology. An inverter converts power generated at power plants into usable electricity for homes and industrial sites. In particular, the 'grid-forming inverter' developed by HD Hyundai Electric helps to stably connect and manage power from renewable energy sources, which have unstable power supply. It is an essential technology for eco-friendly power generation projects while meeting Europe's strict environmental standards. HD Hyundai Electric plans to actively promote business in the renewable energy sector based on this technology.

Alongside this, the company is developing design technology utilizing AI. Previously, transformer design took several months, but with AI, optimal design proposals can be created and performance verified within hours. The CTO said, "Although it takes time, it is a technology we must secure proactively through investment." He added, "We are actively promoting technology linkage among group affiliates in cooperation with HD Korea Shipbuilding & Offshore Engineering's Future Technology Research Institute."

Contrasting with successes in the US market, the company is facing difficulties in the Middle East market due to intensified competition with China. Although it once held the number one market share in Saudi Arabia's power equipment market, the increase of low-priced Chinese products has made the situation challenging. Especially, as Middle Eastern countries raise tariffs to increase local production, competing by exporting products from Korea has become difficult.

Accordingly, the company is pursuing new strategies such as jointly establishing factories with local companies. The CTO said, "Since Chinese companies are targeting the market with price competitiveness and locally customized production, it is difficult to respond with simple exports." The Saudi government is also encouraging various measures, including establishing joint ventures with local companies to build production facilities.

HD Hyundai Electric Ulsan Plant view. Provided by HD Hyundai Electric

HD Hyundai Electric is also preparing strategies to reduce dependence on China for raw material supply. He explained, "Due to the influence of US protectionism on key raw materials such as steel, we will gradually reduce the proportion of China." The company plans to maintain market competitiveness through diversifying supply chains along with expanding local production in the Middle East, anticipating intensified competition with China.

He emphasized that the government's role is also important to strengthen the competitiveness of our industry. This is because the restructuring of global supply chains and tightening regulations are increasing information and regulations that companies find difficult to handle alone. The CTO said, "The government must actively share information with companies and establish cooperative systems to enable competitiveness in the global market," and stressed, "It is necessary to ease government regulations in preliminary feasibility studies for national projects so that companies can invest more boldly in research and development."