In some areas of business, LG Electronics is significantly inferior to its rival compatriot Samsung Electronics, but in the domestic appliance segment, the Korean manufacturer was able to achieve industry-leading profitability indicators. The bet on expensive household appliances allows LG to compensate for failures in the direction of smartphones and automotive electronics.
Since 2016, as noted by the Nikkei Asian Review, LG Electronics has kept its operating profit margin above 8%, which the closest competitors in the household appliance segment cannot achieve: Samsung (5.8%), Panasonic (2.1%) and Haier Electronics Group (4.5%). Self-isolation this year increased the demand for household appliances, according to the company’s own estimates LG Electronics will benefit from this trend if the pandemic rises in May.
LG Electronics Consolidated Net Income First Quarter up to $ 907 million – 88% year on year. The indicator was driven up by sales of expensive models of household appliances and OLED TVs. A landmark for LG’s business was the debut of the Styler series of clothing care products that have been in development for nine years. In the market of South Korea and the USA, according to LG representatives, the brand has strengthened its image in the high price segment. Premium home appliances now account for more than half of LG’s revenue.
Last year, 40.6% of the company’s revenue came from household appliances, 31.4% from televisions, 12.2% from smartphones, and 10.6% from automotive electronics. The remaining 5.2% of revenue was provided by other products. In the second quarter of this year, LG expects a reduction in revenue due to the shutdown of stores in the US and Europe, as well as the suspension of production at the company’s foreign enterprises. In July, the business will begin to bounce back as consumers begin to buy new household appliances.
LG’s smartphone business has been losing operating losses for 19 consecutive quarters, sales are shrinking, and innovation is running out of money. It is difficult for the Korean brand in this segment to compete with Chinese smartphone manufacturers. Moving production to Vietnam and increasing reliance on contractors did not give noticeable benefits. The share of LG Electronics in the capital of LG Display reaches 38%, and the business of the latter is going through difficult times. Perhaps the Korean company will have to make some structural changes in order to develop success in the direction of household appliances and eliminate weaknesses in other activities.
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