LG Display aims high with business transformation
CEO Kwon Young-soo sees results in its China joint venture
By Kim Yoo-chul
SUZHOU, China - For LG Display, finding the right answers for sustainable corporate growth was always tough as its revenue-creating structure is heavily dependent on the cyclical and volatile LCD industry nature.
The company CEO Kwon Young-soo was once being tasked. But it seems evident that he has found a clue _ biz transformation.
Kwon, known as the most-trusted CEO among those in the LG Group of affiliates, now has several reasons to be proud and to celebrate the latest successful event to unveil its advanced 3D panel using a polarizing film in Beijing.
What’s more impressive is that Kwon’s consistent work for an overall business transformation at the LG Group’s critical display-making affiliate has begun yielding visible results.
China is Kwon’s beloved spot as he firmly believes in the huge market potential in the next-television market. The Chinese LCD market is expected to rise by 80 percent to 51.6 million sets in 2012 from last year’s 29.2 million, research firms said.
It’s not quite sure whether Kwon is right; however, more evidence is coming to justify his bets.
Raken gets on track
Amid moves by top-tier television makers that include Samsung Electronics and Sony to expand the outsourcing of important parts of production due to better cost-cuts, leading flat-screen makers are strengthening their strategic partnerships for business sustainability.
Among them, LG is leading the way and it’s no exaggeration to say that LG has laid a firm foundations to foster its business expansion considering the growth of its joint venture in China.
``There had been worries over LG Display’s advance into the set-making business. But the results are visible,’’ said Brian Kim, the CEO of Suzhou Raken Technology, in an interview with The Korea Times in the Chinese city of Suzhou, Monday.
In September 2008, LG Display established the 51:49 joint venture to produce televisions with Taiwan’s AmTran Technology to create a new legal entity based in the Suzhou New District, Jiangsu Province.
Raken has emerged as the second-biggest company within the district in terms of total revenue by reaping $2.6 billion in sales for this year _ up 25 percent from a year ago.
The operating profit margin was estimated at 2.2 percent, a decrease from last year’s 4.5 percent, hit by the industry’s bearish moods.
It supplies televisions to the U.S. TV maker Vizio using original equipment manufacturers (OEM) and original designed manufacturers (ODM).
Raken plans to increase its TV shipments to Vizio to 7 million next year from this year’s some 5 million by solidifying the strategic partnership.
Vizio had knocked Samsung Electronics off of the No. 1 spot for LCD TV shipments in the United States in the third quarter, though Samsung retained its top position for overall flat-panel shipments, according to research firm iSuppli.
But Vizio is no longer just a small player that mainly produces cheaper models.
Behind the scenes is Raken.
Vertically-integrated system
In production, cost-cuts in logistics, packing and the inventory control have been regarded as the top factors to efficiently provide finished products to customers.
The joint venture is the world’s first that applies a vertically-integrated operating system to produce backlight units for LCDs, modules and televisions in a single line, making it possible to drastically cut costs and increase production efficiency.
Raken CEO Kim said it just takes 40 minutes to produce a finalized TV set in the designated ``BMS Line’’ _ just 30 percent of the time of other lines.
Raken plans to increase the number of the BMS lines to seven by the end of March, next year, and expects the lines to take up 50 percent out of the venture’s total production by 2013.
``Vertically-integrated production processes, co-design & co-development and an ideal location base are enabling the venture to better meet the needs of customers,’’ said Kwon Bock, an executive vice president of LG Display, separately.
Hub for innovative products
In the long-term, the venture aims to release a highly-innovative product such as Apple’s iPhone, according to the venture’s CEO Kim, referring to LG Display’s advanced panel-making technology and Raken’s strengthening edges to produce competitive TV sets.
But LG’s Chinese venture is planning to focus on supplying more three-dimensional or 3D televisions based on LG’s new FPR technology _ the advanced technology that has no flickering and produces minimal crosstalk (the blurry ghosting image).
``We will expand the number of 3D TV sets to 15 by the end of next year from this year’s three,’’ said Kim.
The venture has also been in talks with LG Electronics to introduce its ``Art TV,’’ an ODM-based TV that has already been released via Vizio, Philips and Skyworth in South Korea in the latter months of 2011.
Kim expects 3D TVs to feature reduced eye fatigue to become the television industry’s mainstream for 2011 at a time when TV majors are driving up efforts to boost their 3D lineups.
3D televisions will account for 30 percent of the venture’s total LCD TV output for next year, but only with FPR panels. It will focus on producing 42-inch 3D televisions.
Raken is also filling 70 percent of Vizio’s total TV shipments and in recognition of its fact-sheets and higher competency of production lines was approached by Japan’s Sony.
``We’ve been in talks with Sony, though we haven’t seen any substantial progress to strike an actual deal,’’ said the Raken CEO.
``Many television makers are joining ranks to expand outsourcing mainly due to cost-saving. In 2011, the outsourcing portion of each company looks set to increase to 30 to 35 percent, making us aim high,’’ added the executive.
Based on such upbeat predictions, Raken has a plan to expand its annual TV-making capacity to 13 million sets next year from 10 million in 2010.
Its annual monitor-producing capacity will be spiked up to 10 million from 1.5 million from this year, the company said.
Reiterating the continuing corporate growth and favorable business circumstances, the joint venture CEO said Raken’s revenue target for 2011 is $3.4 billion _ up 30 percent from this year.
``I will make Raken the global No. 1 manufacturing based firm in LCD TVs and monitors with Raken’s efficient production systems,’’ said Kim.