[Exclusive] Samsung C&T Expands 'CM' Business Unit... Seeking New Growth Opportunities

Organizational Upgrade to 'PM/CM Team' in Architecture Division
Expanding CM Field Using Experience in Super High-Rise Construction
Systematizing Technical Skills and Benchmarking Other Construction Companies
CM Industry Tense Over Entry into High Value-Added Areas

Samsung C&T is fostering its Construction Management (CM) business to target the global market. To this end, it is expanding its CM organization and starting with the ultra-high-rise building CM market.

The Lakhta Center in Russia, for which Samsung C&T Construction Division is in charge of CM and detailed design services, has a height of 462 meters.

Samsung C&T’s CM Market Declaration

According to industry sources on the 24th, Samsung C&T’s construction division upgraded the PM/CM group, which belonged to the Architecture and Housing Business Unit, to the PM/CM team through an organizational restructuring at the end of last year. The organization was expanded to a team within the UNI Business Unit, which is part of the architecture division. A Samsung C&T official said, "You can think of it as a business that performs architectural management or consulting roles besides construction," adding, "We will also discover new projects and participate in bids."

CM is a field that manages projects by overseeing the entire process from permits to design and construction on behalf of the client to ensure smooth construction progress. HanmiGlobal is a leading company in this field domestically. Although PM and CM differ depending on their scope, they are often used interchangeably in Korea, with most referring to it as CM.

Using CM in construction projects can reduce project costs and shorten the construction period. In projects where design and construction are separately contracted, CM acts as a bridge. Due to these advantages, most large overseas projects utilize CM.

Starting with Ultra-High-Rise Building CM

Samsung C&T is making a full-scale entry into the CM market to secure profitability. The CM industry is considered a high value-added sector within the construction industry. Although the order volume accounts for only 3-4% of the total business, the profit margin per employee is higher than that of domestic and overseas contracting projects. Overseas construction projects are affected by external factors such as exchange rate fluctuations and disputes, but CM has less burden since it mainly requires manpower. By performing CM roles, Samsung C&T can also benchmark data and information held by overseas construction companies.

According to the Overseas Construction Association, the overseas contract status of domestic CM companies this year totaled 24 contracts worth $19.25 million (approximately 26.2 billion KRW). Last year saw the highest contract amount since 2016, with a total of 46 contracts and a contract amount of $171.07 million (approximately 233.2 billion KRW).

Samsung C&T stated, "We will specialize in ultra-high-rise buildings and enter the CM business." Industry insiders view Samsung C&T’s expansion of its CM organization as a move to leverage its experience in constructing ultra-high-rise buildings to secure CM service contracts. Samsung C&T provided CM and detailed design services for the 462-meter-tall Lakhta Center construction project in Russia in 2014. It also has experience constructing the world’s first and second tallest buildings, the Burj Khalifa in Dubai (2004) and the Merdeka 118 building in Malaysia (2015), which can be utilized as know-how in the CM business.

Kim Wooyoung, a research fellow at the Construction Industry Research Institute, explained, "Technical capabilities to persuade clients are necessary, and there is an aspect of systematizing technical skills," adding, "Working from the client’s perspective offers various technical advantages."

Will Samsung C&T Bring a ‘Catalyst Effect’ to the CM Market?

The CM industry is on edge over Samsung C&T’s moves. If Samsung C&T expands its CM business comprehensively, it is highly likely to become a catalyst in the CM market. Bechtel, the world’s No. 1 global PM company, also started as a specialty construction company before becoming the top PM firm. Research fellow Kim said, "It can be seen as Samsung C&T approaching the market from the perspective of pioneering new markets by entering high value-added areas like Bechtel."

Meanwhile, Samsung C&T ranked 25th among the top 250 global construction (contracting) companies compiled by the US construction magazine ENR last year. Among domestic construction companies, Hyundai Engineering & Construction ranked highest at 11th, followed by Samsung E&A at 22nd, Hyundai Engineering at 32nd, and Daewoo Engineering & Construction at 48th.