LG Electronics' long-prepared business diversification has begun to be proven in results. New businesses such as HVAC, automotive electronics, and robots have hit their stride, delivering record-high results even amid sluggish TV and home appliance conditions. During the same period, while Samsung Electronics' semiconductor (DS) division is leading results, some say the finished goods (DX) institutional sector's overhaul still has a long way to go before a full pivoting (business strategy shift).
◇ Growth confirmed in non-appliance businesses such as automotive electronics and data center HVAC
According to the industry on the 10th, LG Electronics is seen to have confirmed clear growth potential in non-appliance areas in the second quarter this year. In particular, by strengthening its presence in the corporate (B2B) market, including the automotive electronics business, the company's overall structure is said to be moving away from the negative effects of global appliance demand, seasonality, and especially the low-priced appliance offensive from China.
Earlier, LG Electronics disclosed preliminary consolidated results for the second quarter this year of 23.8297 trillion won in revenue and 1.5788 trillion won in operating profit. Compared with a year earlier, revenue rose 14.9% and operating profit jumped 146.9%, the highest ever for a second quarter. The revenue increase was 3.0945 trillion won and the operating profit increase was 939.4 billion won, indicating that more than 30 won of operating profit was retained per 100 won of additional revenue. The operating margin also climbed from 3.1% in the second quarter last year to 6.6% this year. Although a one-off tariff refund on U.S.-bound export volumes (industry estimate of around 300 billion won) was reflected, even excluding that, the operating margin comes to 5.4%, 2.3 percentage points higher than a year earlier, supporting the view that core competitiveness has improved in real terms.
This performance is meaningful even after stripping out two variables: the low-price, high-volume push by Chinese appliance makers and seasonal peak effects. In the global TV market, the combined share of Chinese companies has already surpassed the combined share of Samsung and LG. LG Electronics succeeded in defending prices through a two-track strategy targeting both premium and the volume zone (mid- to low-priced products) and by expanding its built-in business-to-business (B2B) operations, overturning with results the industry's stock worries about the "China threat" and "high in the first half, low in the second half" seasonality.
Notably, this quarter's results clearly confirmed growth engines beyond appliances and TVs. The vehicle component solutions (VS) business is viewed as having established itself as a new cash cow in the B2B arena, underpinned by a large order backlog and expanding demand for premium infotainment. Revenue is understood to have increased 69% from a year earlier, while it has maintained a mid–single-digit operating margin centered on infotainment (IVI) for five consecutive quarters.
The HVAC (ES) business is seeing continued investment to secure opportunities in cooling solutions for artificial intelligence (AI) data centers, on top of increased demand for heat pumps and unitary systems driven by record heat waves in Europe. In addition, the component solutions business is expanding its portfolio beyond existing appliance parts such as compressors and motors to robot actuators, strengthening its linkage with the robotics business, while high-margin, recurring revenue-based businesses such as webOS, appliance subscriptions, and online sales are steadily expanding. The collaborative robot "Exium" is targeting mass production in the second half, and the company recently created a robot business center reporting directly to the chief executive officer (CEO), integrating business development, sales, and operations.
◇ Samsung still has a long way to go on structural overhaul outside semiconductors
Samsung Electronics is also seeking breakthroughs in various areas, including HVAC and in-vehicle infotainment, but analysis suggests it is not yet ready. In the securities market, operating profit for Samsung Electronics' Mobile eXperience (MX) and Networks division in the second quarter this year is estimated at 500 billion to 1 trillion won, and less than 100 billion won for the Visual Display (VD) and Digital Appliances (DA) divisions. Excluding roughly 200 billion to 300 billion won in operating profit at its automotive electronics subsidiary Harman, the rebound across the finished goods business was limited.
Samsung Electronics is responding to China's low-price offensive with a "selection and concentration" strategy, such as shutting down non-core production bases and consolidating overseas subsidiaries, but unlike LG Electronics, it remains in a defensive reorganization phase. A securities industry official said, "In the case of Samsung Electronics, outside semiconductors, the DX institutional sector is still in the preparation stage for data center cooling solutions, robots, and vehicle components, but in the case of LG Electronics, it has been confirmed to be on track enough to play a cash cow role."
Market reaction to LG Electronics' business structure overhaul is also positive. After the preliminary second-quarter results were announced, six of seven domestic securities firms raised their target prices. The average target price of the seven securities firms rose to 246,400 won, up more than 75,000 won from before, while foreign securities firms such as HSBC and CGSI also raised their targets to 280,000 won and 270,000 won, respectively.
Yuanta Securities Korea cited LG Electronics' technological competitiveness in its robot component business—high efficiency and the ability to leverage existing thermal management technologies—as a strength, and predicted that once a pilot line starts operating in the second half, revenue contributions would begin in earnest next year. There is also an outlook that if big tech hyperscaler orders for the data center cooling solutions business are secured in the second half this year, it could translate into revenue starting in the second half of 2027.