LG Electronics invested an all-time high of 560 billion won in its home appliance business in the first half of this year. It is reinvesting revenue from the strong-performing appliance business into expanding overseas production bases and upgrading domestic production processes. As competition in the global appliance market intensifies, including low-price offensives by Chinese companies, the move is seen as an effort to turn current profitability into production competitiveness and maintain market leadership. It is also expanding investment in new businesses such as materials, components, and robots.
According to the semiannual report on the 24th, investment by the HS Business Headquarters, which handles home appliances, totaled 560 billion won in the first half. That is about 69% higher than 331.3 billion won a year earlier, the largest ever. Considering that first-half investment by the HS Business Headquarters stayed around 300 billion won over the past five years, this year's investment rose sharply.
The backdrop to the increased investment is strong results in the appliance business. The HS Business Headquarters posted 14.0188 trillion won in first-half sales, the highest ever for a half-year. The operating margin reached 9.0%. LG Electronics is widening both markets and product lineups with a two-track strategy: expanding premium sales in advanced markets such as North America and Europe, while targeting the mid-priced "volume zone" in emerging markets such as India and Latin America.
The profitability gap in appliances and TVs with rival Samsung Electronics has widened this year. While the business scopes do not align exactly, comparing LG Electronics' HS (Home Appliances), MS (Media & Entertainment), and ES (Eco Solution) business headquarters with Samsung Electronics' VD (Visual Display) and DA (Digital Appliances) divisions shows the operating profit gap grew from 990 billion won in the first quarter to 1.1511 trillion won in the second quarter. The cumulative first-half gap reached 2.1411 trillion won.
In particular, in the second quarter the two companies had similar sales, but profitability diverged. The combined sales of LG Electronics' HS, MS, and ES business headquarters were 14.9164 trillion won, with operating profit of 1.1411 trillion won. Samsung Electronics' VD and DA divisions recorded sales of 14.5 trillion won but posted an operating loss of 10 billion won. After logging 200 billion won in operating profit in the first quarter, Samsung's VD and DA divisions turned to a loss in the second quarter. Although differences in business scope limit a simple comparison, the profitability gap stood out at similar sales levels.
◇ Expanding Global South production bases and upgrading the Changwon "mother factory"
LG Electronics is channeling investment capacity secured from its appliance business into reorganizing its global production system and strengthening manufacturing competitiveness. According to the industry, a large portion of first-half investment went to building new plants in Piraí do Sul, Paraná, Brazil, and Sri City, India, and to advancing production processes at the Changwon plant in South Gyeongsang. In high-growth emerging markets, it is increasing local production capacity, while at home it is upgrading manufacturing technologies to apply across global production bases.
This aligns with LG Electronics' recent push to target the "Global South." In India, it is building a new appliance plant in Sri City, Andhra Pradesh, and in Brazil it is establishing a production base in Paraná. The goal is to secure local production capacity in India and Latin America, where growth potential is high, to respond quickly to demand while reducing logistics and tariff burdens. Dispersing production bases also helps address geopolitical variables and supply chain shifts.
Alongside expanding overseas production bases, it is also strengthening the role of domestic production hubs. The Changwon plant serves as the core production base for LG Electronics' home appliances and as a "mother factory" that disseminates manufacturing technology and process know-how to overseas production subsidiaries. LG Electronics is advancing Changwon's production processes to develop manufacturing technologies and is strengthening a system to apply them to overseas production bases, including India and Brazil.
It is also putting funds into new businesses, not just boosting manufacturing competitiveness for existing appliances. LG Electronics built a functional material production line based on glass powder with an annual capacity of 2,000 tons in Haiphong, Vietnam. The aim is to expand materials technologies accumulated in appliance manufacturing into a business-to-business (B2B) materials business supplying external customers.
In the second half, it will widen investment into components and robots. It plans to invest in production facilities for full-scale mass production of actuators, which it is nurturing as next-generation core components, and continue investing in the robot data factory being built in Yangjae, Seoul.
A robot data factory is a facility that acquires and processes data needed for robot training. LG Electronics is leveraging motor, sensor, and control technologies accumulated in appliances for its robotics business. The strategy is to extend technologies and funds secured from the appliance business into adjacent areas such as materials and components and physical AI to secure new revenue sources.
An LG Electronics official said, "We are channeling the results secured in the appliance business into investments to strengthen future competitiveness," and added, "We plan to continue investing to upgrade global production bases while securing competitiveness in new businesses."