Monday interview: Hwang Chang-gyu, KT chief executive

Hwang Chang-gyu jokes that the iPhone might not be here today had it not been for his vision for mobile chips.

In 2004, when he was head of Samsung Electronics' semiconductor business, Mr Hwang was invited by the late Steve Jobs to Apple's headquarters in Cupertino. The Apple founder was mulling how to make the iPod slimmer and its battery last longer.

"At that time, the iPod was quite bulky with its battery lasting only two hours. Mr Jobs wanted to make a fancier design. And he was already thinking about making the iPhone," recalls the 62-year-old.

Mr Hwang was a prominent figure in the global semiconductor industry, partly because of a theory published in 2002 - locally dubbed Hwang's Law - that memory chip density would double each year, a more rapid evolution than that previously observed by Gordon Moore, Intel's co-founder.

The South Korean showed Jobs Samsung's newly developed flash memory chips, which store data and whose development he had spearheaded. "He said 'this is exactly what I wanted'." Then Jobs laid out his vision of Apple's future to Mr Hwang for nearly an hour, writing details on a whiteboard.

When the iPhone was launched in 2007, Samsung ended up as its main supplier of key parts, including flash memory chips, application processors and display panels.

The partnership has helped to cement Mr Hwang's status as one of the rare stars among South Korean business leaders - and propel him into the CEO's chair at KT Corp, the country's biggest telecoms company by sales.

Clad in navy suit, white shirt, blue tie and silver-rimmed glasses, he cuts a neat figure at the company's futuristic new HQ in downtown Seoul, designed by the Italian architect Renzo Piano.

He took over at KT a year ago, after a brief stint as the country's chief technology officer, attempting to develop new growth engines for Asia's fourth-largest economy. In that role, Mr Hwang tried to make South Korea less of a "fast follower" and more of an innovator, complete with a more tolerant approach to risk-taking and productive failure.

The challenges of his current post have been even more pressing. He admits that he could not sleep well when he joined KT, overwhelmed by the daunting task of turning round the group.

Soon after his arrival, he had to make a public apology for a personal data leak affecting KT customers, as well as a financial scam that predated him involving one of its subsidiaries. The former state-run company, which has a market capitalisation of Won8.3tn (£5.1bn), suffered a Won966bn net loss last year on sales of Won23.42tn.

Mr Hwang has embarked on a massive restructuring to reduce the size of KT, slashing about 8,300 jobs or a quarter of its workforce and letting go of a third of its executives. He is selling non-core assets such as the car rental and financing units to strengthen the company's balance sheet, after it diversified in search of new growth under his predecessor, Lee Suk-chae, who has gone on trial for alleged embezzlement and breach of fiduciary duty.

There have been early signs of recovery. KT last week posted a Won281bn net profit for the first quarter of 2015, while the number of wireless subscribers was up 6.2 per cent year-on-year to 17.5m in the same period, with average revenue per user up 4.5 per cent.

Finding new revenue streams is now the company's biggest challenge as South Korea's mobile market nears saturation, with fierce competition among the country's three telecoms groups depressing their margins.

Mr Hwang is pinning his hopes on futuristic services in five areas - energy, healthcare, security, transportation and next-generation media - convinced that KT can become a leader in the "internet of things", in which ever more objects are connected electronically.

South Korea is already the world's most wired nation with the fastest internet network. KT, which is leading the country's drive for fifth-generation, or 5G, mobile connectivity, is investing Won4.5tn during Mr Hwang's three-year term to build superfast internet networks that will be more than 10 times faster than current ones.

"Telecoms itself could be a mature business but the industry's paradigm will completely change when telecoms networks and platforms converge with other industries," he says.

"The industry could see explosive growth in data traffic once the 5Gtechnology enables various connected services."

Mr Hwang was born in Busan, the country's southernmost port city, where his youth included a stint in the high school choir. His grandfather was a famous palace painter towards the end of the Chosun dynasty.

After graduating from Seoul National University and studying for a doctorate in the US, he worked as an adviser for technology companies, including Intel. With his children growing up, he mulled a return to his homeland.

An ambition to overtake Japanese chipmakers - which he had viewed up close on a business trip while working as a researcher at Stanford University - led him to join Samsung in 1989.

"At that time, Japanese companies were very much advanced in semiconductor technology and manufacturing, although they were a little behind Intel in terms of design capability," recalls Mr Hwang. "The trip helped me set a goal [of beating Japan] and join Samsung."

In fact, he faced tougher challenges after Samsung overtook Japanese rivals in the D-Ram chip business. "Once our technology surpassed that of Japanese companies, it felt daunting," he says. "But I was convinced somehow that we were moving past the PC era into a mobile one, where demand for graphics or video clips would sharply increase. So I focused on developing flash memory chips, betting that they would spark the mobile big bang."

His predictions turned out to be true. However, not all of KT's unionised workers feel he has so far lived up to his fame. Some industry watchers also suggest key projects, such as the "Gigatopia" bid to make the internet 10 times faster, are against the current global IT trend focusing on mobile phones.

Mr Hwang was paid about Won600m (£367,000) last year including bonuses, significantly less than local telecoms rivals and his predecessor at KT. He acknowledges the difficulties of running a provider of services such as KT rather than a manufacturer such as Samsung.

South Korea's service sector remains under-developed, with low productivity and little presence overseas. "In manufacturing, if you come up with a quality product, that's it. But offering a service requires a more emotional approach, with broader perspectives and details to impress customers."

For KT, privatised in 2002, developing a longer-term growth strategy is further complicated by regulation and political interference. Mr Hwang stays silent about such sensitive issues, admitting they are beyond his control because KT cannot ignore its public role, but he remains optimistic about the company's future, with a vision based on "advanced technologies and efficient management".

But Hwang Young-key, his close friend and former president of Samsung Securities, says his KT role is very different to running the semiconductor business at Samsung, where thorny issues could be handled by the group's central functions.

"At KT, he has to meet various people from government officials to labour union members and has to solve many difficult issues alone. It must be quite challenging for him."

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