LG Electronics spurs portfolio revamp under Vision 2030

LG Electronics CEO Cho Joo-wan speaks during the company's investor forum at LG Science Park in southwestern Seoul, Wednesday. Courtesy of LG Electronics

LG Electronics CEO Cho Joo-wan said Wednesday that the company is successfully growing new businesses that can post more than 1 trillion won ($751.7 million) in annual sales.

Cho believes these businesses will serve as key growth drivers supporting the company's Vision 2030 strategy, which focuses on revamping its business portfolio.

During an investor forum at LG Science Park in southwestern Seoul, Cho shared the progress and achievements of the company's medium- to long-term plan as part of its commitment to directly and transparently communicate with the market.

Along with Cho, Chief Financial Officer Kim Chang-tae and other top executives of the company attended the event.

Vision 2030 aims to transform itself from an electronics device maker to "a smart life solution company," providing customer experiences across various spaces, including the home, commercial environments, mobility and virtual spaces.

Under the strategy, the company promised to achieve 7 percent in compound annual growth rate, a 7 percent operating profit margin and a seven-fold growth in enterprise multiple, an indicator showing a company's corporate value.

LG Electronics said the company has been cruising toward the goal, posting an 8 percent year-on-year growth in sales for the first half of this year. During the same period, its operating profit margin stood at 6 percent, and enterprise multiple grew fourfold.

"I am proud to say that we have been steadily laying the groundwork to achieve our future vision over the past year, and we are now creating structural changes and sustainable outcomes in various business fields," Cho said.

"With strong confidence and a sense of responsibility, we will continue to push forward consistently and vigorously to reach our goals."

LG Electronics' OLED evo G4 TV / Courtesy of LG Electronics

As part of the vision, LG Electronics will revamp its portfolio to maximize the growth potential of its existing businesses, nurture platform-based services, accelerate business-to-business (B2B) operations and explore new business fields.

Among the company's existing businesses, Cho noted that its home appliance businesses are showing a stable growth trajectory despite the backpedaling of Korea's home appliance market, as the company expanded direct-to-customer selling strategies.

In terms of B2B operations, LG Electronics said it has achieved significant progress in sectors such as automotive parts, heat, ventilation and air conditioning (HVAC) and smart factories by capitalizing on the market transition toward digitalization and electrification.

The company's B2B segment accounted for 27 percent of its sales in 2021 and increased to 35 percent in the first half of this year. The company aims to increase the B2B segment's share of its total revenue to 45 percent by 2030.

A highlight of the forum was the company's strategy to nurture what it calls "unicorn businesses" which post more than 1 trillion won in annual sales.

"As the venture capital industry calls a startup valued at over $1 billion a unicorn, LG Electronics is calling a business model which generates more than 1 trillion won in sales a unicorn business," Cho said.

"Among our businesses, home appliance subscription has already become a unicorn business, and there are other prominent seed businesses which are expected to be described as unicorns in the near future."

LG Electronics' home appliance business posted 1.13 trillion won of revenue last year, up 33 percent from a year earlier. As a growing number of customers opt for home appliance subscription services to save costs and use new appliances for as long as they want, the company expects that the number will grow to 1.8 trillion won by the end of this year, up 60 percent from last year.

Another potential unicorn is the webOS-based advertising and content business. WebOS refers to LG's multitasking operating system for smart devices such as smart TVs.

Since LG Electronics has sold more than 220 million smart TVs in the past 10 years, the company believes those TVs will be a powerful and lucrative platform. It projects that the revenue from this business will likely surpass 1 trillion won by the end of this year, quadrupling from 2021.

The company also said its HVAC business will likely gain unicorn status within three years, buoyed by growing demand for chillers for artificial intelligence data centers.

A chiller is a system to air-condition large buildings and facilities by using chilled water. LG Electronics said its chiller business logged an annual growth rate of over 15 percent for the past three years, with overseas sales more than doubling during the same period.

"These goals are becoming reality very fast," Cho said. "By pursuing a portfolio that can ensure scalability and profitability, we will continue making efforts to make the company's proper value recognized in the market."