LG Brand Value 1.2 Trillion Won in 3 Years... Who Is More Valuable?

Top Trademark Revenue Among Domestic Groups
Electronics 381.8 Billion KRW · Ensol 206.7 Billion KRW

[Asia Economy Reporters Oh Hyung-gil and Choi Seoyoon] The value of the ‘LG’ brand name is expected to reach 400 billion KRW in one year. Despite the recession, the amount companies spend on trademark royalties?a kind of fee paid for using the group’s common trademark?is continuously increasing. Generally, trademark royalty income, which is recorded as ‘internal revenue’ by holding companies with high ownership stakes by the controlling family, tends to grow proportionally with sales. Simply put, even if operating profit decreases, trademark royalty income increases as sales grow.

According to the business community on the 19th, LG Group is the domestic group that maintains the highest trademark royalty income. LG Corporation, the holding company of LG Group, recently signed a trademark transaction agreement worth 1.2 trillion KRW over three years from 2023 to 2025 with major affiliates such as LG Electronics and LG Chem.

The LG trademark is owned by LG Corporation, and the estimated transaction amount related to trademark usage with 11 affiliates this year totals 365 billion KRW. This is about 20 billion KRW higher than the 344.5 billion KRW trademark transaction scale announced by the Fair Trade Commission last year.

The transaction amount is expected to increase further from next year. LG Electronics will bear 381.8 billion KRW in trademark fees over three years, and LG Energy Solution, in its third year since establishment, is expected to pay 206.7 billion KRW, surpassing LG Chem’s 186.3 billion KRW. This is understood to be due to the surge in electric vehicle battery sales. Additionally, LG Display, which is currently undergoing business restructuring due to recent losses, will pay 166.9 billion KRW in trademark royalties.

SK Group, which ranked second in trademark transaction scale last year with 218.7 billion KRW, is also expected to see an increase in trademark royalty income this year and next. SK Innovation, a core affiliate, saw its sales increase by 82.4% year-on-year through the third quarter, signaling a rise in trademark royalty fees as well. Next year, the increase is expected to continue with the addition of sales from SK On, which will be fully operational.

Posco Holdings, which transitioned to a holding company system in March this year, is also seeing an increase in trademark royalty fees. Posco Holdings recently decided at a board meeting to increase the trademark transaction amount with Posco Construction this year. The fee set a year ago was 5.7 billion KRW but has been raised by 37% to 7.8 billion KRW. Next year’s trademark royalty fee is also set to increase by 7% to 8.3 billion KRW compared to this year.

A Posco Holdings official explained, "Before the holding company was established, we paid brand usage fees to Posco, and at that time, the fees were calculated based on sales excluding internal transactions with Posco. However, since there are no internal transactions with Posco Holdings, the fees for this year have increased."

However, Posco Construction, which is experiencing business difficulties due to liquidity issues triggered by Legoland, soaring raw material prices, and a real estate market downturn, faces a burden. Posco Construction’s cumulative sales for the third quarter were 6.864 trillion KRW, down 16% compared to the same period last year, and operating profit in the third quarter alone was cut by 61%. Jeon Ji-hoon, a researcher at Korea Credit Rating, pointed out, "Due to the recent downturn in the real estate market, rising interest rates, and the Legoland incident, liquidity tightening in the construction and project financing (PF) securitization market is progressing rapidly. If uncertainty expands, additional liquidity burdens may increase."

The reason trademark royalty fees increase despite poor performance lies in the calculation method. LG and SK calculate trademark royalty fees by multiplying 0.2% by total sales minus advertising expenses. Posco applies a 0.1% multiplier. The structure is such that fees increase as affiliate sales grow. Other companies have slightly different ratios, but the calculation criteria are similar.

Some groups expect trademark royalty income to decrease next year compared to this year. GS Corporation anticipated 94.2 billion KRW in trademark royalty income this year from GS Caltex, GS Construction, and GS Retail, but it is forecasted to decrease to 92.9 billion KRW next year.

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