Even During Peak Season, Only TV Inventory Piles Up... Samsung and LG Cry Over Soaring Marketing Costs

Marketing and Discount Events for US Black Friday and World Cup
Stockpiles Increase Despite Panel Price Drops, Marketing Costs Rise
'Profitability Emergency' Warning Lights

LG Electronics' OLED Evo Gallery Edition 97-inch.
[Photo by LG Electronics]

[Asia Economy Reporter Han Yeju] The TV industry is experiencing an unprecedented recession. Although raw material prices have risen due to inflation, the average selling price (ASP) has fallen because of weakened purchasing demand and competition with rival companies. Samsung Electronics and LG Electronics are putting all their efforts into various domestic and international marketing campaigns, including discounts on TV products for major events such as Black Friday in the U.S. and the Qatar World Cup, but expectations are low. This is because the burden of ballooning inventory is too great. With warning signs lit up for profitability, the two companies plan to deplete as much of their 'troublesome' inventory as possible by the end of the year.

According to the industry on the 22nd, Samsung Electronics has been holding the 'Samsung TV Year-End Clearance Big Sale' event since early this month targeting the recently opened Qatar World Cup, offering various promotions such as discounts and gifts on major premium TV products. Its subsidiaries in major countries such as the U.S. and Europe are also conducting various discount events. In particular, the discount on the top premium lineup, the Neo QLED 8K product, is significant. The U.S. subsidiary offers discounts of up to $2,000 on this product.

LG Electronics is also running the 'Victory Korea Grand Festival' targeting the Qatar World Cup until the end of this month in Korea. The main feature is doubling the reward points on premium LCD TV lines such as OLED, QNED, and NanoCell. The U.S. subsidiary is holding a sale offering up to 30% off on some OLED TV models.

The TV industry is recording poor performance this year due to inflation and the prolonged Ukraine crisis. While a catalyst for performance recovery is needed, the industry outlook suggests that even traditionally special large sports events will not have much impact this year. This reflects the fact that the economy is in recession and TV demand is not recovering. Additionally, as the global biggest shopping seasons such as U.S. Black Friday and China’s Singles’ Day approach, related marketing costs are also increasing.

In fact, Samsung Electronics spent 4.6446 trillion won on advertising expenses cumulatively in the third quarter this year, up 23.3% from 3.7671 trillion won in the same period last year. Sales promotion expenses also increased by 20.7%, from 4.4501 trillion won to 5.3728 trillion won. Meanwhile, the average selling price of TVs dropped by 5% compared to last year. LG Electronics also showed an increasing trend in advertising expenses, spending 994.7 billion won by the third quarter compared to 959 billion won last year. The average selling price of TVs was lowered by about 1% compared to the previous year.

Due to sluggish demand, the inventory burden has increased, making operational difficulties even greater. Samsung Electronics’ inventory turnover rate fell significantly to 3.8 times in the third quarter from 4.5 times at the end of last year, indicating that the speed at which inventory converts to sales is slowing. Accordingly, the utilization rate of video equipment in the third quarter was lowered to 75.4% (31.299 million units) of production capacity. LG Electronics’ inventory turnover rate also slowed to 5.8 times at the end of the third quarter from 6.5 times at the end of last year, leading to reduced production. LG Electronics’ average utilization rate of video equipment in the third quarter was 81.1% (16.592 million units).

An industry official said, "After the disappearance of the home appliance pent-up demand phenomenon, inventory burdens have increased while sales have decreased due to reduced market demand. We are experiencing a double hardship of not being able to offset fixed costs," adding, "We need to significantly reduce inventory by the end of the year to establish a new sales strategy for next year."

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