LG becomes more agile under Koo's leadership

LG zeroing in on auto parts, EV batteries and OLED panel businesses

By Kim Bo-eun

Forty-year-old Koo Kwang-mo came under the spotlight when he took the helm at LG Group in June 2018. There were inevitably doubts at the time over whether the scion could prove himself as the chief of Korea's fourth largest conglomerate.

In Koo's first three years as chairman, LG took drastic steps, including pulling out of the smartphone business, launching a separate electric vehicle (EV) battery affiliate and separating affiliates considered less central to the group. But the young leader is known to have remained mostly backstage.

In the past few years, LG has scouted dozens of competent outside figures as senior executives of core affiliates, which was a shift from the group's former tendency to have key posts occupied by those inside the company. "Executives of the affiliated companies should be credited for their role in the latest steps that have been taken," an industry official said.

Koo has kept a low profile, with few cases of speaking out in public. His lack of visibility is why questions linger over when he will emerge as a strong, confident leader.

"It will inevitably take time for Koo to settle in as the chairman of the group, given that he is young and needs to accumulate experience," another industry official said.

Regardless, LG appears to be headed in the right direction following a reorganizing of its portfolio by disposing of unprofitable businesses to focus on new drivers of growth.

Big changes at LG in past year

LG ending its smartphone business of 26 years was among the biggest news of the industry earlier this year. The decision came as LG accumulated close to six years of losses amounting to around $4.5 billion, as the electronics giant faced increasing competition from Chinese smartphone vendors. The exit will be completed by the end of July.

LG also separated from the company a number of affiliates considered less central. Koo's uncle, Koo Bon-joon, is now heading the newly-launched LX Group, with units including a trading affiliate and materials manufacturer.

LG Electronics, as well as LG Corp., saw their stock prices reach new highs in December following the news of a joint venture LG's electronics maker would set up with Canada's mobile technology firm Magna International. The new entity, focusing on electric powertrains, launches on July 1. LG is projecting that the joint venture firm will see its sales grow by 50 percent on an annual basis from 2022 to 2025.

LG's auto parts business is set to be strengthened with the launch of the new unit, as it is expected to create synergy with LG Electronics' existing vehicle solutions division and automotive lighting and headlight systems provider ZKW, which LG acquired in 2018. LG also formed a joint venture with the digital mobility firm, Luxoft in March, launching the California-based, Alluto, focusing on in-vehicle infotainment.

President Moon Jae-in speaks at a luncheon with the leaders of Korea's top four conglomerates at Cheong Wa Dae on June 2. From left are LG Group Chairman Koo Kwang-mo, SK Group Chairman Chey Tae-won, Moon, Hyundai Motor Group Chairman Chung Euisun and Samsung Electronics Vice Chairman Kim Ki-nam. Yonhap

Businesses in electric vehicle (EV) batteries and organic light-emitting diode (OLED) panels for TVs and other smart devices have been set as LG's other core pillars of growth.

LG Energy Solution is among the world's top EV battery makers, as it battles with China's CATL for the top spot in the global market. The new affiliate launched last year, as it was separated from its parent company, LG Chem. LG Energy Solution is now preparing to list on the local stock market within this year to secure funds for additional investments.

The battery maker is moving quickly to defend its market share, as it sets up production bases in the fast-growing U.S. market for EVs. LG has partnered with GM in a joint venture producing batteries, and is building two factories in the U.S., which will have a production capacity totaling 70 gigawatt-hours once completed. The LG affiliate is also looking separately to invest 5 trillion won to set up an additional production base of its own.

Meanwhile, LG is also betting on OLED panels as the next-generation screens for TVs. LG's display manufacturing unit is the only company able to mass-produce large-size OLED panels. LG Display is forecast to switch to an annual surplus this year, as the demand for OLED panels grows amid a shift from liquid crystal display (LCD) panels, increasingly dominated by Chinese players offering cheaper options.

LG Display has expanded production capacity at its plant in Guangzhou to meet market demand. Market projections are that the display unit could see sales of its OLED panels for TVs exceed 5 trillion won this year.

Future technology

LG has continued to invest in new technologies and business areas, including artificial intelligence (AI), big data and 5G. LG acquired industrial robot manufacturer Robotstar in 2018 and TV ad data analytics company Alphonso in January this year. LG launched an AI research center earlier this year, supported by 16 of its affiliates, which will pour 200 billion won into new technologies.

LG is also dedicating resources into developing next-generation telecommunications technology. LG Electronics established a joint research center with Korea Advanced Institute of Science and Technology (KAIST) in January 2019, to develop 6G technology.

The new investments are being made after disposing of businesses, such as liquidating LG Electronics' fuel cell business and selling its water treatment business in 2019. LG Chem's LCD polarizer business and telecom unit LG Uplus' payment gateway business were also sold last year.

LG Group spent 4 trillion won in M&As in the past three years and is expected to continue investments into key areas.