Profitability in the TV, home appliances, and heating, ventilation and air conditioning (HVAC) businesses of Samsung Electronics and LG Electronics diverged sharply in the second quarter of this year. Samsung Electronics posted sales of 14.5 trillion won but recorded about 10 billion won in operating loss. In contrast, LG Electronics reported sales of 14.9164 trillion won and operating profit of 1.1411 trillion won. The sales gap was only 416.4 billion won, but the operating profit-and-loss difference widened to 1.1511 trillion won.
According to the industry on the 31st, the two companies' performance trends were generally similar until the end of last year. LG Electronics mostly led in profit size, but profitability rose or fell together depending on market conditions and seasonality. In the fourth quarter of last year, both companies each recorded losses exceeding 500 billion won in the related businesses.
However, the trend has clearly split this year. LG Electronics posted a combined operating profit in the 1 trillion won range for two consecutive quarters in the first and second quarters. The profit margins were 8.0% and 7.6%, respectively. In contrast, Samsung Electronics' operating profit was only 200 billion won in the first quarter and returned to a loss in the second quarter.
◇ The "decoupling" driven by the speed of business model reform
Industry observers cite differences in the speed of business model reform as the backdrop for this "decoupling." The TV and home appliance market is currently facing a downturn due to ▲ slowing demand ▲ low-price offensives by Chinese companies ▲ "chipflation" (chips + inflation) ▲ and logistics and raw material burdens from U.S. tariffs and the Middle East war. LG Electronics has, over several years, expanded online direct-to-consumer (D2C) and business-to-business (B2B) sales and grown recurring revenue businesses such as webOS-based smart TV services and product subscriptions to cushion external shocks. Samsung Electronics is also expanding subscription and smart TV businesses, but analysis says it has not moved far enough away from the traditional model reliant on product volume and economies of scale, leaving it directly exposed to worsening market conditions.
Differences in how management responded are also cited. Roh Tae-Moon, president of Samsung Electronics, was appointed CEO and head of the DX (finished goods) division in Nov. last year, leading the home appliance, TV, and smartphone businesses. Since Roh took office, Samsung Electronics has expanded outsourced production of low-margin items, streamlined production and sales bases, and pushed resource efficiencies.
By contrast, Lyu Jae-cheol, who was appointed CEO of LG Electronics in the same month, emphasized rebuilding competitiveness in quality, cost, and delivery, and shifting the portfolio toward high-performance businesses. While LG Electronics focused on changing the core business structure, Samsung Electronics leaned relatively toward short-term expense control, which became a factor dividing results.
A home appliance industry official said, "Samsung Electronics secures economies of scale based on volume, so when the market is favorable, its cost competitiveness is strong, but if demand and expenses are shaken at the same time, the profit-and-loss impact can be large," and added, "LG Electronics has spent years reshaping its business structure and putting in place mechanisms to absorb external shocks, and this difference in preparation time showed up in this year's results."
◇ LG posts profits in appliances, TVs, and HVAC; Samsung cites "higher costs"
LG Electronics and Samsung Electronics have similar business structures in the TV, home appliance, and HVAC markets. However, because they recognize results differently, it is hard to compare each business one-to-one. The industry, however, sees an overall comparison as possible because LG Electronics' combined three-division figures and Samsung Electronics' home appliance and TV results include core business performance.
Samsung Electronics groups results for TVs, home appliances, HVAC, and medical devices into Visual Display (VD) and Digital Appliances (DA). LG Electronics breaks out results into ▲ Home Appliance & Air Solution (HS) for appliances ▲ Media & Entertainment Solution (MS) for TVs and webOS ▲ and Eco Solution (ES) for the HVAC business.
In the second quarter, LG Electronics' HS recorded sales of 7.0757 trillion won and operating profit of 685.9 billion won. MS posted 5.1146 trillion won and 219.4 billion won, and ES posted 2.7261 trillion won and 235.8 billion won. Appliances, TVs, and HVAC all turned profits. This contrasts with Samsung Electronics' VD and DA, which during the same period posted sales of 14.5 trillion won and an operating loss of 10 billion won.
On its second-quarter earnings conference call, Samsung Electronics said, "VD saw results decline from the previous quarter due to higher costs, and DA saw results decline due to cost increases." In effect, it cited cost increases common across the industry as the backdrop for the loss.
LG Electronics, meanwhile, said, "Despite multiple risk factors, including higher logistics costs from the Middle East war and rising memory prices, operating profit improved thanks to a higher mix of premium products, better cost structure and operational efficiencies, and tariff refunds."
◇ Pace differs in new businesses, too: LG moves to orders and mass production, Samsung outlines direction
To respond to the structural slump in the home appliance and TV market, both companies are fostering artificial intelligence (AI) and robots, and AI data center cooling as new growth engines. However, observers say there are differences in commercialization speed in this field as well. LG Electronics, leveraging the strength from defending profitability in existing businesses, is posting concrete results in new businesses with orders, certifications, and mass production. In contrast, because restoring near-term profitability in appliances and TVs is urgent for Samsung Electronics, it remains at the stage of outlining directions and plans for future businesses.
On its second-quarter earnings call, LG Electronics said, "Orders for AI data center cooling solutions exceeded 600 billion won in the first half, and we aim to win projects worth several trillion won by year-end." It also completed certifications from Nvidia for some models of its coolant distribution unit (CDU). In robotics, it is producing initial units on an actuator pilot line and will begin taking orders from external customers and building a mass production system in the second half.
Samsung Electronics entered the data center cooling market by acquiring FläktGroup in Germany and elevated its robot organization, the RX Business Promotion Office, to report directly to the CEO. It plans to accumulate technology and data in manufacturing and logistics sites and then expand into multipurpose humanoids and consumer robots. However, it did not present specific order volumes, revenue targets, or commercialization timelines.
A home appliance industry official said, "LG Electronics grew subscriptions, B2B, and webOS over several years and is now moving to the stage of orders and mass production in new businesses," and added, "Samsung Electronics, with the memory upcycle limiting the companywide impact of weakness in appliances and TVs, appears to have opted first for the relatively easier remedy of pruning low-margin products and regions rather than fundamentally strengthening competitiveness."