Stagnant demand for conventional products has led HHI¡¯s Electro Electric Systems Division to expand into new areas like bio-tech, IT and environmental equipment. With research tie-ups with leading foreign entities and royalties from technology transfers on the rise, the future for the division looks increasingly bright.

With crisis comes opportunity, or so some people say. But locating that elusive silver lining in today¡¯s cloudy economic landscape is more challenging than ever. Hyundai Heavy Industries¡¯ Electro Electric Systems (EES) Division is fortunate to have done just that, turning a hostile business climate to its favor. The global slowdown of the past few years has sapped demand for conventional industrial electrical equipment, such as high-voltage transformers and switchgears. The EES Division has responded by diversifying quickly into high-tech items, winning new customers in the IT, biotechnology and environmental technology industries who have come to appreciate Hyundai¡¯s ability to meet their demanding standards and specifications.

More recently, HHI, with one eye on what appears to be the next-generation star performer for the automobile market-electric vehicles-signed a joint-venture agreement with Enova Systems, Inc. of the US to develop cutting-edge technology for producing electric vehicle equipment and advanced power management and conversion systems. The joint research center, named the Hyundai Enova Advanced Technology Center (HETC) and located in Torrance, California, is Korea¡¯s first overseas research center dedicated to developing electric vehicle equipment and distributed generation systems.

¡°Diversification to hightech products is the key for our survival and growth,¡± says Kim Young-nam, Senior Executive Vice President and Chief Operating Officer of the EES Division. ¡°We have seen some success in the IT, BT (biotech) and ET (environmental tech) areas. We are interested in electric vehicle development, and we think superconductors will be very promising business for EES.¡±

HHI is also well positioned to become a primary provider of converter and inverter systems, train control management systems, traction motors, transformers and battery chargers for use in the high-speed trains that will be running on the Seoul- Busan and Seoul-Mokpo lines. Korea wants to localize bullet trains after initial supplies are met by imports from the Alstom-led European consortium which won the contract in early 1990s to build Korea¡¯s highspeed railway transportation system using French TGV trains. Electrical equipment accounts for about 30% of the cost of a high-speed train. Hyundai¡¯s EES can provide about half of the electrical equipment for Korea¡¯s highspeed trains if the company is able to take part in the localization program.

Despite the bright prospects on the domestic front, the real growth in sales revenues is expected to come from overseas markets as a result of the EES Division¡¯s diversification of products and customer bases. The division¡¯s sales revenues for 2002 were 704 billion won, 25% of which was earned from exports. By 2010, the EES's exports are projected to account for about a full half of its total sales revenues of $2.5 billion. ¡°Together with product diversification, our overseas markets will also be greatly expanded to include China, Middle Eastern countries such as Iran and United Arab Emirates, and Southeast Asian countries, including Malaysia,¡± notes Kim. The EES has been aggressively strengthening its overseas sales network as well as moving its production capabilities to other countries in the form of joint ventures or wholly-owned subsidiaries.

The division is now earning royalties from the transfer of in-house technology to foreign companies. It recently concluded a contract for Gas Insulated Switchgear (GIS) technology transfer with Tatung of Taiwan. The deal was agreed under the Taiwan Electric Power Company's expansion plan for substation facilities. So far, the EES has exported five technologies in total, with Iran among the key importing countries, and earnings from technology transferscurrently estimated at $1.3 million-are expected to rise to $2 million by the end of 2003. The division earned its first royalty income from a technology transfer agreement with AAL (Autometers Alliance Ltd.) of India. HHI received $52,000 in royalties from the Indian company, which provided SIV (Static Inverter) to Indian Railways. Though the amount is relatively modest at present, the contracts with AAL and Tatung clearly demonstrate in which direction the EES should be heading as it seeks to maintain its prominence in the marketplace.

Prospects in the Middle East have suddenly looked up in the aftermath of the war in Iraq. Hyundai¡¯s EES Division expects orders from the region, mostly involving projects to build substation and desalination facilities, to jump three to four times this year over 2002 to about $60 million. The EES Division recently shipped three bays of GIS to Iran for the Mobarake Steel Company expansion project. Hyundai Heavy¡¯s GIS adopts a motor spring operating type of circuit breaker. With the successful completion of its compact series of GIS, the division has received many inquiries from potential customers. In particular, Saudi Arabia, Kuwait, Iran and the United Arab Emirates have recently increasing orders for power stations and substation electrical products.

Following two years of research, the EES has succeeded in developing two high-power water-cooled induction motors for use in electric vehicles. The new motors are 160 and 320 horsepower each, and are the main driving gear for electric vehicles. Currently, these motors are being used on shuttle buses and freight trucks in several parts of the United States.

Dockwise of the Netherlands placed an order for two high-voltage marine generators (6,500kW), which have 60% higher capacity compared to the largest existing 4,000kW marine generators produced in Korea. The 600rpm generators with 6kV rated voltage, which were delivered in June, are designed to be vibration-free and waterproof with F class insulating material. This order, which was won in the face of intense competition with major world-class manufacturers, is expected to strengthen HHI¡¯s position in the 10MW marine generator market. HHI¡¯s technology and quality were once againconfirmed by receiving orders directly from a shipowner rather than from a shipyard, which is very exceptional as most orders for generators are placed by shipyards.

Early in 2003, EES put the final touches on an 840 MVA transformer with a rated voltage of 26/345kV, another product developed with in-house technology. The transformer, the largest in Korea, has the capacity to provide electricity for up to 300,000 households simultaneously. The division is at the forefront of the transformer market among domestic rivals with sales of 210 billion won in 2002. Since the ultra-large transformer requires high technology to receive 20,000-ampere currents, its successful completion has led to the recognition of EES¡¯s advanced technology.

Among the many examples of HHI¡¯s ability to meet the requirements of hightech industries are a multifunctional digital-type protection and measuring devices called Hi-MAP, a 36kV Cubicle-type Gas Insulated Switchgear (CGIS), a web-based marine monitoring and control system (ACONIS-2000) and a solution-concept distribution control system (HiMAX- 2000).

The division has completed eight bays of 800kV GIS for the Shin-Taebaek Substation under contract with Korea¡¯s electricity monopoly, KEPCO. The project was an integral part of KEPCO¡¯s plans to raise system voltage to 765kV in order to minimize electricity loss and more efficiently transmit bulk electricity. EES developed the 800kV GIS after three years of joint research (1997-2000) with Niiva Co. of Russia.

Hyundai Heavy Industries established EES in 1973 to supply heavy electrical equipment to the company¡¯s main shipbuilding division. The division built production lines for transformers, switchgears and rotating machinery in 1977 in a technical joint venture with Siemens of Germany. Over the next 10 years, the division added high- and lowvoltage circuit breakers and low-voltage motors to its product list. In the early 1990s, EES began expandingits markets at home and abroad in collaboration with the advanced EPC (Engineering , Procurement and Construction) firms, particularly Duke/Fluor Daniel, Black & Veatch, ABB and MHI. Those arrangements enabled Hyundai to advance into ultra-high-voltage equipment markets monopolized up until then by the world's big players.

In 1997, HHI took over Elprom Trafo of Bulgaria, a company specializing in transformers and on-load tap-changers. A year later, it set up Hunelec of Hungary, a research and development institute for high-voltage rotating machinery, GIS and transformers. Hyundai Heavy has also been seeking to build a local presence in major markets, such as the Middle East, Asia and North and South America.