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LG charges ahead for tomorrow’s business

4th-generation leader Koo Kwang-mo speeds up group-level restructuring of business portfolio, ditching money-losing smartphones, investing more in automotive parts and AI

Chairman and CEO Koo Kwang-mo (Yonhap)
Chairman and CEO Koo Kwang-mo (Yonhap)
Under its fourth-generation leader, LG Group, South Korea’s fourth-biggest conglomerate, is undergoing a major transformation: From a manufacturer of fridges and washing machines to one of future cars, robots and artificial intelligence-based solutions.

Since rising to the helm of the group in 2018, Chairman and CEO Koo Kwang-mo has put forward the “digital transformation” driver across all LG affiliates, and is spearheading a group-level restructuring of its business portfolio.

This year, LG is more than aggressive, making new strategic investments while pursuing the sale of money-losing businesses.

The latest announcement by LG Electronics regarding its smartphone business appeared to be part of this drive.

LG Electronics, last week, said it was mulling all possible measures to find a breakthrough for its struggling mobile device division, including a sale or drastic downsizing.

The segment has accumulated deficits of 5 trillion won ($4.5 billion) as of last year, failing to make a turnaround for the last five years.

The announcement was taken as a signal that LG will push to reallocate its resources to more promising businesses such as vehicle components and solutions, eyeing the future car industry.

“Vehicle components are definitely the most promising business in which the company is investing a lot,” said an official at LG Electronics.

Earlier this month, LG announced it was creating a $1 billion joint venture on electric vehicle powertrain with Canada’s Magna, the world’s largest auto parts supplier.

The deal was the second-largest made by LG after the acquisition of Austria-based headlamp company ZKW for $1.3 billion in 2018.

Such large-scale deals were led by LG Electronics’ Vehicle Components Solutions (VS) division, which was established in 2013 to create a new growth engine.

The VS division incorporated staff from LG’s Home Entertainment and Energy Components divisions and V-ENS, a vehicle parts engineering firm acquired by the electronics affiliate in 2013. V-ENS was spun out from LG CNS in 2004.

By starting to supply motors, inverters and battery packs to global automakers like General Motors in 2016, the VS business has been growing rapidly, particularly after Koo took office.

It was called the Vehicle Components division until before 2018, but got its new name to reflect an expansion in its business horizon -- from simply supplying hardware parts to offering total software solutions that connect and control vehicle parts.

“Our goal is to become one of leading suppliers of vehicle components and solutions,” LG Electronics CEO Kwon Bong-seok said during a press event held by Magna at CES 2021. “The automobile industry is a key engine of LG’s future business portfolio.”

With the ZKW acquisition and joint venture with Magna, LG’s VS business has completed a competitive portfolio of infotainment system, electric vehicle solution, safety and other convenience devices, headlamps and lighting and e-powertrains.

LG is working on autonomous driving solutions for connected cars with multiple global tech companies, such as Qualcomm and Microsoft.

With Qualcomm, it has been working to develop future connected car solutions, including the “vehicle to everything” communications technology, by setting up a joint research body in 2017.

With US-based NXP and Germany-based Hella Aglaia, LG has signed a partnership to co-develop advanced driver assistance system solutions. It is also working with Microsoft to secure cutting-edge cloud platforms for operation of autonomous driving software.

The Korean company has also partnered with Here to develop a high-definition map solution for connected cars.

The other LG affiliates are also spurring the group’s transformation into a future car solution developer by streamlining their businesses.

LG Energy Solution, spun off from LG Chem last year, is in charge of developing and providing lithium-ion batteries for electric vehicles.

LG Innotek, electronics parts maker, has around 20 vehicle components on its own, including precision motors, sensors, communications modules, camera modules, battery control system, DC-DC converters and EVCC.

Mobile carrier LG Uplus is developing autonomous driving solutions based on its 5G network.

LG Display, the world’s largest organic light-emitting diode panel maker, is developing a variety of display solutions, including transparent OLEDs, for use in future vehicles.

“The latest decision to reconsider the fate of the smartphone business is part of LG’s group-wide efforts to raise efficiency in the current business structure, discover new growth engines and find ways to create synergy among the affiliates,” an LG official explained.

By Song Su-hyun (song@heraldcorp.com)
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