LG Electronics (LGE) makes the products that have tech-savvy consumers chomping at the bit in the kitchen, in the media room, and on the go. A leader in consumer electronics, mobile communications, and home appliances, LGE operates through more than 80 subsidiaries worldwide that design and make flat panel TVs, audio and video products, mobile handsets, air conditioners, washing machines, refrigerators, and more. Asia and North America are its two largest markets, each contributing about 30% of sales. LGE owns Zenith Electronics (acquired in 1995) and LG Display. Founded in 1958 as Goldstar, LGE established a North American headquarters in 2004. South Korea's LG Corp. owns about one-third of LGE.
LGE is investing heavily in brand marketing in a bid to position itself as one of the world's top three electronics brands in 2010. Its goal is to sell 8 million LCD TV units, as well as 2.5 million plasma TV units. LGE is also focused on boosting sales of its commercial air conditioners, drum washing machines, and side-by-side (aka French door) refrigerators. LGE and US rival Whirlpool have been trading patent infringement claims over refrigerator technology. In 2009 LGE claimed that Whirlpool infringed on its patent for the "ice-making system in the fresh food compartment." Previously, Whirlpool had claimed that LGE violated five of its refrigerator patents, but subsequently withdrew four of the infringement claims.
To bolster production of large-scale air conditioning systems both in South Korea and abroad, LGE acquired the A/C business of industrial machinery manufacturer LS Mtron for $134 million in early 2011. The deal included a factory in Jeonju, South Korea, as well as a research and development team. LS Mtron operated as part of LG Group until 2003, when its operations were spun off.
Amid rising competition from electronics makers and tough economic times in many key markets, LGE is teaming up with other companies to make a name for itself in noncore businesses, such as water processing and solar energy technology. It is moving into the water treatment business, agreeing in mid-2011 to form a joint venture with Hitachi Plant Technologies in Japan. The joint venture, called LG-Hitachi Water Solutions, will be 51%-owned by LGE and 49%-owned by Hitachi Plant Technologies. LGE aims to build the water treatment business into a $6 billion sales generator by 2020. In 2011 the company added Daewoo ENTEC, a Korean water treatment firm, to its portfolio water treatment businesses. Solar cell technology is also a focus for LGE. In 2009 it partnered with Germany's Conergy to form a joint venture to manufacture solar cells. As part of the agreement, LGE acquired a 75% stake in Conergy's Frankfurt solar cell plant. The company also decided to convert its plasma panel manufacturing line in Gumi, Korea, into a solar cell production line, with plans for two solar cell production lines at a later date.
LGE is focusing on boosting its mobile communication handset business and enhancing its share of the LCD TV market. Indeed, the company is looking to sell about 20% more cell phones. To that end, in September 2009 LGE announced the launch of three new Windows phones. The three smartphones are the first of 13 LG-branded Windows phones slated to launch globally before the end of 2010. The new smartphones build on previous offerings including the Shine phone, launched in 2007 as a follow-up product to its popular Chocolate phone.
The company is also focusing on the organic light-emitting diode (OLED) business. In 2009 LGE acquired the OLED division of Eastman Kodak, which pioneered the technology in the 1970s but lacked the investment capability to see it through. OLEDs are commonly used in screens and monitors, and are recognized for their energy efficiency and vivid display quality. As part of the agreement, LG's OLED patents and developments will be accessible to Kodak as they pertain to its own product line.
LGE is closely watching the digital television market. In 2009 it agreed to develop core digital TV chips and semiconductors with Samsung Electronics. As part of the agreement, LGE will design the electronic units, and Samsung will make and test them. The firms expect to save about $240 million over three years through the development deal and generate about as much by exporting its products.
It's also partnering with other suppliers in the industry to extend its reach into other niches. The company has created a device that allows Netflix users to watch downloaded movies on their TV screens.
LGE in 2009 consolidated its home appliance and consumer electronics businesses in the US to align its sales and marketing divisions for LG Electronics USA. The company's also restructuring its manufacturing facilities in Mexico. As a result, LG Electronics plans to invest some $1 million through 2012 to improve its plants in Mexico, the production hub for North America. – less
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