[Exclusive] "Can't Endure Anymore"... 'Piano Master' HDC Youngchang to Sell Chinese Factory

Promoting Sale of Key Production Base with 90% Sales in China
Management Crisis at Chinese Subsidiary Weighs on Overall Performance
Choosing Survival Over Production: "Time to Tighten the Belt"

The 'Piano Master' HDC Young Chang has decided to sell its factory located in Tianjin, China. Entering China in the mid-1990s with hopes pinned on the growth of the local middle class amid stagnation in the domestic piano market, the company has now initiated business restructuring due to accumulated losses over several years and deteriorating business conditions.

According to industry sources on the 18th, HDC Young Chang is currently promoting the sale of the factory owned by 'Young Chang Musical Instruments China Co., Ltd. (Young Chang Musical Instruments),' which manufactures and sells pianos in Tianjin, and has begun searching for potential buyers. Currently, HDC Young Chang operates two local subsidiaries, including 'Tianjin Young Chang Steel and Wood Co., Ltd.,' which produces piano parts.

The Tianjin factory has served as HDC Young Chang's key production base in China. Approximately 90% of the pianos manufactured there are sold in the Chinese domestic market. However, recent demand slowdown and worsening performance have made it difficult to continue factory operations. An HDC Young Chang official explained, "Negotiations will proceed immediately once a buyer is found."

HDC Young Chang plans not to completely withdraw from the Chinese market even after pulling out of the Tianjin factory. The company intends to continue piano production through the buyer who acquires the Tianjin factory or through an outsourcing company in the Shanghai area, aiming to reduce costs. Pianos produced by the Shanghai outsourcing company are currently supplied only to the Korean market, and options such as transferring the Chinese domestic distribution rights to that company are also being thoroughly considered.

This decision is directly linked to the management difficulties of these subsidiaries. According to HDC Young Chang's business report last year, Young Chang Musical Instruments recorded sales of 2.8 billion KRW during the period but posted a net loss of 4.6 billion KRW and a total comprehensive loss of 15.5 billion KRW. Sales decreased by 34% compared to the previous year, while total comprehensive losses nearly tripled. Tianjin Young Chang Steel and Wood generated close to 200 million KRW in sales in 2023 but had no sales last year, effectively being in a 'business suspension' state. The capital of the two companies stood at -110 billion KRW and -940 million KRW, respectively, indicating capital erosion.

These realities are also burdening HDC Young Chang's overall performance. Last year, HDC Young Chang recorded consolidated sales of 41.1 billion KRW and an operating loss of 4.6 billion KRW, marking five consecutive years of losses. Although 57% of total sales came from pianos (5.1%), electronic instruments (38.8%), and orchestral instruments (8.2%), there was no profit, and operating profit of 2.2 billion KRW was generated only from the non-core business of 'professional construction work.'

The Chinese market had been designated as a key market and a foundation for future growth even before Young Chang was acquired by the HDC Group in 2006. Riding the wave of the local market boom, the company rapidly grew to record sales of around 170 billion KRW in the late 1990s. At the Tianjin factory, over 1,000 local employees once produced 50,000 pianos annually. However, since the 2000s, as piano demand declined and the high-end market was dominated by the U.S. and Japan while low-end markets were controlled by Chinese companies, the industry conditions rapidly deteriorated.