[The Korea Economic Daily] Started a Business with a 4 Million KRW Cash Loan… Became an 800 Billion KRW Billionaire 'Jackpot' [Yoon Hyun-joo's Main Dish is Stocks]

"Expanding Overseas Logistics Infrastructure to Become the 'Coupang' of the Cosmetics Industry"

"We will become the Coupang of the cosmetics industry by expanding our overseas logistics infrastructure. We aim to connect the ever-growing new K-Beauty brands to the world," said Kim Sung-woon, CEO of Silicon2 (born in 1972), in an interview on the 23rd, outlining his mid- to long-term business strategy. Silicon2, a KOSDAQ-listed company that exports Korean cosmetics overseas (market cap: KRW 2.4438 trillion as of the 25th), is aiming to join the "KRW 1 trillion sales club" this year.

Operating Eight Logistics Centers and Exporting to Over 3,000 Overseas Companies

The company leads the cross-border direct purchase market for K-Beauty brands based on its extensive distribution know-how. With eight logistics centers in the U.S. (California and New Jersey), Indonesia, Malaysia, Dubai, Poland, Vietnam, and Gwangju, Gyeonggi Province, it exports cosmetics to about 3,000 overseas companies, including Sephora, Ulta, Costco, and Watsons. Its headquarters is located on the 9th floor of 231 Pangyo-ro, Bundang-gu, Seongnam-si, Gyeonggi Province.

More than 80% of its sales come from overseas K-Beauty businesses. The business model includes a retail platform, digitalized order system, and K-Beauty marketing linked to overseas buyers, enabling real-time response to customer needs. The brand portfolio is also diverse: last year, the top 10 brands by sales were Beauty of Joseon (24%), Anua (11.2%), COSRX (7%), Round Lab (4.5%), Tocobo (4.2%), TIRTIR (3.6%), Skin Angel (3.5%), Pyunkang Yul (2.7%), Heimish (2.6%), and NUMBUZIN (2.3%).

Kim noted, "Just as Coupang conquered the Korean logistics network with innovations like free returns and rapid delivery, we are stepping on the growth accelerator through aggressive investment in overseas logistics infrastructure, diverse brands, and media marketing centered on storytelling." He added, "Coupang made shopping easy in Korea. Likewise, Silicon2 is working to ensure global consumers can easily purchase their desired brands anytime with just a tap."

"Many overseas corporate clients want Korean cosmetics, but large retailers like Walmart in the U.S. still face long wait times to receive products," he said. "We aim to enhance accessibility and convenience for corporate clients and grow together with the K-Beauty industry."

Record-Breaking Results Every Year – Samsung Securities Forecasts KRW 220 Billion Operating Profit

He emphasized, "With content planning optimized for global marketing, we contribute to boosting the visibility and growth of various small and medium-sized K-Beauty brands. We aim for KRW 1 trillion in sales and KRW 180 billion in operating profit this year by expanding our logistics infrastructure."

Since 2021, Silicon2 has broken its sales records annually. Sales increased from KRW 131 billion and operating profit of KRW 8.8 billion in 2021 to KRW 691.5 billion and KRW 137.6 billion last year—an increase of 427.86% and 1463.64% respectively in three years.

Sales by region: U.S. (22.1%), Poland/Europe (13.1%), Korea (6.8%), UAE (5.7%), and Indonesia (4.9%). In Q1 this year, sales were KRW 245.7 billion (up 63.9% YoY), and operating profit was KRW 47.7 billion (up 62.1%), making another record-breaking year likely.

Samsung Securities projects KRW 1.106 trillion in sales and KRW 220 billion in operating profit for 2024. Operating profit margin improved from 6.69% in 2021 to 19.89% in 2023 due to economies of scale and continued expansion of overseas logistics infrastructure.

Kim added, "In 2020, we became the first in the K-Beauty industry to introduce AGVs (automated guided vehicles) in logistics centers, moving toward smart factories. As global interest in K-Culture grows, our price negotiation power is also strengthening." "To realize economies of scale, we are consistently reviewing aggressive expansion of our overseas logistics centers." Logistics cost as a percentage of sales fell from 5.8% in Q2 2022 to 2% in 2023.

Reasons for K-Beauty’s Growth: Korean Cultural Appeal and Cost Performance

Kim cited two reasons for K-Beauty’s rapid rise: the global affection for Korean culture and strong cost-effectiveness. He said, "Korean cosmetics typically range from $15 to $25, cheaper than premium French brands, and are largely unaffected by tariffs from former U.S. President Trump, enhancing competitiveness."

Even with a 10% tariff on a $15 product, the final price would be $17—still cheaper and better performing than many foreign products.

"As a distribution platform, connecting overseas buyers with Korean suppliers is essential. Securing stable suppliers helps us tap into untapped global markets," Kim explained. The rise of indie brands like Beauty of Joseon is directly linked to Silicon2’s growth.

He added, "With each new overseas branch, we refine our systems with improved product, marketing, and distribution expertise."

Silicon2 is also expanding into K-Food and K-Pop. While current annual sales in those sectors are modest (around KRW 10 billion), the company is exploring M&A opportunities to scale.

Balaan Investment a Setback – Future M&A to Be Carefully Prepared

In March, Silicon2 invested KRW 15 billion in the online luxury platform Balaan, which turned out to be a costly mistake. The investment was split: KRW 7.5 billion as a priority investment and the remainder conditional. After the disclosure, Balaan faced delayed payments to partners and entered court receivership, putting the initial investment at risk.

Kim responded, "We wanted to diversify by linking Italian luxury with Korea." He admitted, "The Balaan case disrupted our luxury business." He continued, "We’ll keep studying distribution-related industries." While cautious for now, the company is preparing for well-thought-out M&As in the future.

Although the cosmetics distribution platform business may seem easy to enter, Kim noted, "Competitors like Cheongdam Global exist, but building logistics infrastructure and negotiation power with overseas clients takes time. It’s more capital-intensive than expected, and our focus is on strengthening competitiveness abroad."

He explained that current inventory is around KRW 180 billion, with KRW 60–70 billion worth in transit by sea.

Silicon2 works with 30,000 influencers across 68 countries to create K-Beauty content and host local fan meetings to enhance product competitiveness. The company actively invests in firms with strong global potential, such as Pyunkang Korean Herbal Dermatology Research Institute (KRW 300 million), Aid Korea Company (KRW 1.3 billion), and One& (KRW 400 million). Combined revenue from its six investment companies grew from KRW 9.2 billion in 2018 to KRW 123.5 billion, proving Silicon2’s foresight and increasing asset value. However, risks include potential tariffs from Trump or geopolitical issues like the Russia-Ukraine war.

Fivefold Stock Price Increase in 1 Year and 7 Months Since First Interview

As performance improves, the stock price is also soaring. As of the 25th, the price is KRW 39,950—up 22.17% this year. Compared to KRW 7,890 on October 19, 2023 (date of the CEO’s first interview with the reporter), it has jumped 406.34%. A KRW 10 million investment then would now be worth about KRW 50 million. Asked about shareholder returns, Kim said, "If results meet expectations this year, we’ll consider dividends."

When asked what kind of company he wants to build, Kim replied humbly, "Rather than long-term planning, I focus on capturing short-term business opportunities. Filling in what’s needed at each moment got us here." He admitted, "Even planning one year ahead is difficult."

"Just as Korea’s exports grew after the Gyeongbu Expressway opened, and trade thrived along China’s Silk Road, we’ll continue drawing a global logistics map to become a leading K-Beauty distribution platform," he said. He added, "We aim to grow together with K-Beauty." His MBTI is INTP, preferring responsive strategies over long-term blueprints.

Silicon2 has 61,171,908 total shares. CEO Kim owns 31.47%, and 16 related parties hold 47.67%, making them the largest shareholders. Foreign ownership is 5.13%, meaning less than 50% of shares are publicly traded.

As of Q1, cash and equivalents were KRW 149.9 billion, and tangible assets KRW 106.3 billion. Year-end debt ratio was 74.99%, and capital retention ratio 728.12%.

Starting a Business with a 4 Million KRW Cash Loan … From Semiconductor Distribution to Rapid Growth in Cosmetics Distribution

His first step in society was at Kiryu Electronics, a company that manufactured digital set-top boxes and digital radios but was delisted in 2014 and has since closed. At the age of 27 in 1999, he worked in the purchasing team of Kiryu Electronics, gaining 14 months of experience before challenging the semiconductor distribution business at age 29 in 2001. He founded his business with a 4 million KRW cash loan and grew it into a company with 50 billion KRW in sales by age 34.

In 2010, as the industry reorganized around major IT companies like Apple and opportunities for semiconductor distribution narrowed, he took a bold step into cosmetics distribution in 2012. According to him, there were hundreds to thousands of semiconductor distribution companies for Samsung Electronics alone at that time.

He recalled, “In the early 2000s, Teheran-ro in Gangnam was bustling with IT companies. I had 30 employees and was torn between starting a second business or just maintaining a small company.” Ultimately, he decided that the best option at a young age was a new challenge, so he entered cosmetics distribution. He said, “The early days of cosmetics distribution were the hardest. Since I started in semiconductor distribution, I wore a suit and visited cosmetics wholesalers all over the country. Starting from zero in a new field was really difficult.” He especially struggled to build a sales network by randomly searching for cosmetics wholesalers on Naver and meeting merchants. However, that experience laid the foundation for him to grow into a stock billionaire with assets worth approximately 769.1 billion KRW today.

When asked for advice to young people, he said, “If you face a moment of choice whether to do something or not, just do it and regret it later if you must. Try first, and if it doesn’t work out, quit quickly. Knowing when to cut losses quickly is also an important competitive advantage.” He added, “If games are fun, then real life is even more fun. Always get out there and challenge yourself — that spirit is important.” Finally, to shareholders, he said, “I sincerely thank you for trusting and investing in our company, and I will repay you with performance. We are positively considering dividends this year, so please watch us with a long-term perspective.”

Despite the soaring stock price, it remains a burden for new investors. Nevertheless, securities firms have taken a favorable stance. Samsung Securities analyst Lee Ga-young analyzed, “Strong network effects give Silicon2 a competitive edge, shining even more amid unexpected events like tariff issues.” She explained, “Unlike competitors who temporarily slowed U.S. shipments after tariffs were imposed, Silicon2 had secured a substantial inventory in the U.S. before tariffs, enabling continued operations without immediate price hikes.” She emphasized, “Major clients prefer Silicon2 for stable supply, and brands that previously used other distributors or sought direct market entry are returning to Silicon2.”

Meritz Securities analyst Park Jong-dae noted, “With European sales now greatly surpassing U.S. sales, expectations for global expansion have risen. Korean cosmetics exports are rapidly increasing across France, Spain, Italy, Central Asia, and down to the southern hemisphere.” He concluded, “As Korea’s largest cosmetics trade vendor, Silicon2 will continue to absorb the global K-Beauty momentum. Considering a projected 29% average annual EPS growth from 2024 to 2027, the stock price is reasonable.” He raised the target price to 51,000 KRW, indicating a potential 27.66% upside from the current price.