Samsung and LG Endure COVID-19 Impact with 'Power of Home Appliances'... 1st Quarter Factory Operating Rates Revealed

LG Electronics Q1 Factory Operating Rate Air Conditioner 127.5% Refrigerator 111.9%
Samsung TV Global Market Share at 32.4%... Highest Quarterly Record

[Asia Economy Reporter Kim Hyewon] Despite the COVID-19 pandemic, Samsung Electronics and LG Electronics raised the operating rates of their home appliance factories producing air conditioners, refrigerators, and TVs to maximum levels in the first quarter, defending their performance. However, in the second quarter, when the US, Europe, and other parts of the world fell under the influence of COVID-19, the closure of overseas factories and sales channel blockades are expected to cause a decline in operating rates and widespread business downturns.

According to the first-quarter business reports submitted by each company on the 19th, LG Electronics' average operating rate of air conditioner factories in the first quarter was 127.5%. This is the second-highest figure ever, following the exceptional boom in the first quarter of last year (136.7%). Since 2011, when LG Electronics began disclosing operating rates by product, this is only the second time the first-quarter air conditioner factory operating rate has exceeded 120%. In the same quarter, LG Electronics' refrigerator factory average operating rate was 111.9%, marking the third-best performance in history for that quarter. The TV factory also showed a higher-than-average rate at 96.5%.

The operating rate is the ratio of production volume to production capacity; an operating rate above 100% means the factory produced more products by running additional shifts. For LG Electronics air conditioners, the combined production capacity of the Changwon factory in Korea and factories in China and Thailand in the first quarter was 2,171,000 units, while actual production reached 2,769,000 units.

For Samsung Electronics, the global TV market share in the first quarter reached an all-time high for a single quarter. According to market research firm Omdia (formerly IHS Markit), Samsung Electronics held the highest global TV market share by sales in the first quarter at 32.4%, followed by LG Electronics (18.7%), Sony (7.1%), TCL (6.4%), and Hisense (6.1%). Despite the global TV market shrinking by 10% compared to last year during the same period, Korean companies such as Samsung Electronics and LG Electronics expanded both shipment volumes and market shares. Global TV shipments fell 10.2% to 46.5 million units, but the market share of Korean companies based on shipment volume jumped from 31.6% to 36.1%, reclaiming the top spot from Chinese companies. Samsung Electronics' market share growth is attributed to strong sales in the premium market priced above $2,500 centered on QLED TVs and the large-screen TV market of 75 inches or more, strengthening its leadership.

The average operating rate of Samsung Electronics' TV product factories in the first quarter was 97.9%, higher than the annual average of 97.5% last year and 96% in the first quarter of last year. Compared to the mobile device (HHP) factories, which usually maintain an 80-90% operating rate but dropped to 73.3%, TV products were less affected by COVID-19. An industry insider explained, "In the first quarter, production disruptions occurred only in China, where the COVID-19 outbreak happened first, while Korea was spared from production issues due to strong quarantine measures. Fortunately, demand was steadily supported by premium products in the first quarter."

The problem lies in the second quarter when COVID-19 hit the US, Europe, and other Western countries in full force. Due to the sharp drop in demand in the largest sales markets and the extended forced shutdown periods of major overseas factories, production is expected to have suffered significant damage. An industry insider said, "From the end of March, difficulties arose in sales sites in the US and Europe, followed by challenges in local production. Even if domestic factories operate normally, export orders will inevitably decrease, affecting performance."

In fact, after barely surviving the first quarter thanks to the strength of home appliances, the earnings outlook for Samsung Electronics and LG Electronics in the second quarter is declining. As of today, the consensus compiled by FnGuide from securities firms forecasts Samsung Electronics' second-quarter sales at 51.1181 trillion won and operating profit at 6.3774 trillion won, down 8.92% and 3.33% year-on-year, respectively. LG Electronics is expected to see second-quarter sales of 13.2454 trillion won, down 15.25% year-on-year, and operating profit of 385.1 billion won, a 40.95% decrease, according to securities firms' projections.

This content was produced with the assistance of AI translation services.