Vacuum Cleaner Costs 1.5 Million Won... Home Appliance Prices to Rise Further This Year

Rising Raw Material Prices and Worsening Parts Supply Crisis Increase Cost Burden
Popularity of High-End Premium Product Lines Continues

[Asia Economy Reporter Park Sun-mi]Office worker Kim Yujin (42, pseudonym) bought a Samsung Electronics vacuum cleaner for 170,000 won when she moved out independently in 2012. It was a new model equipped with a function that separately collects the dust in a dust chamber and releases air outside after passing through a HEPA filter. Five years later, in 2017, as she was about to get married, Kim purchased a Dyson cordless vacuum cleaner, which was the trend at the time, as a wedding gift. Although it was an expensive vacuum cleaner priced at around 1 million won, it was famous for its ‘new features,’ so she added it to her purchase list without hesitation. Five years later, in 2022, Kim bought an LG Electronics premium vacuum cleaner for 1.3 million won as a housewarming gift for her younger sibling. She said, “The price of this product, including the vacuum cleaner, all-in-one tower, and various nozzles, was in the 1.5 million won range, but I bought it 200,000 won cheaper through various discount promotions,” adding, “Now it’s hard to find domestic products priced in the 1 million won range.”

Due to the prolonged COVID-19 pandemic, the home appliance industry, which enjoyed a boom last year, is expected to implement price increases again this year. Although product prices were raised by up to about 30% last year due to continuous increases in raw material and logistics costs, the burden has further increased this year as the raw material and supply crisis worsened due to Russia’s invasion of Ukraine. The incorporation of increasingly advanced new technologies and the high-price strategy of ‘premium’ product lines are also analyzed as factors driving prices up.

According to the home appliance industry on the 21st, Samsung Electronics, which holds the No. 1 position in the global TV market, saw its average TV selling price rise about 32% last year compared to the previous year. LG Electronics, which surpassed Whirlpool to become the global leader in home appliance sales, also saw its average TV selling price increase by 26.4% during the same period. This is about eight times the 3.3% increase from the previous year.

During this period, LG Electronics also raised the average selling prices of refrigerators and washing machines by 7.2% compared to the previous year. Following a 7.9% increase in 2020, this marks a two-year consecutive rise in the 7% range. The average selling price of air conditioners also rose 9.8% last year, reversing the previous year’s 4.7% decline.

Although prices are rising, customer demand for premium home appliances is increasingly growing. This is because the time spent at home has increased due to COVID-19, boosting demand for home appliance replacement, and the MZ generation (Millennials + Generation Z), who tend to purchase customized products they like even if expensive, has emerged as the main consumer group.

Accordingly, factory operating rates and performance in the home appliance industry are also soaring. For LG Electronics, the operating rates of refrigerator, washing machine, and air conditioner factories soared to 126%, 106%, and 110%, respectively, last year. Both Samsung and LG Electronics recorded their highest-ever sales in the home appliance sector last year, with sales increasing by 15.9% and 21.7%, respectively.

Despite this boom, the home appliance industry is deeply concerned about the soaring raw material and logistics costs.

In fact, the price of display panels for TVs and monitors, which are major raw materials for Samsung Electronics’ home appliance division, jumped about 39% last year. LG Electronics also saw the average price of steel, a major raw material for home appliances, rise 21.8% last year, about five times the previous year’s increase of 3.9%. Resin and copper used in heat exchangers for air conditioners and refrigerators also rose by 18.2% and 15.1%, respectively. The reason why there is speculation that home appliance prices will rise further is that the industry is focusing on premium products as a countermeasure against profitability deterioration.

An industry insider said, “The average price of home appliances is rising because sales of premium product lines with higher price points are doing well, and manufacturing costs are also increasing due to rising raw material prices,” adding, “Although the increase in raw material prices is not immediately reflected in product prices, if the current trend continues, consumer prices will inevitably rise.”

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