LG Electronics Surpasses Samsung in First Half... Could It Overtake for the First Time This Year?

Despite the challenging economic environment in the first half of this year, attention is focused on whether LG Electronics, which earned more money than Samsung Electronics, can surpass Samsung Electronics in annual performance for the first time. LG Electronics has never earned more money than Samsung Electronics on an annual basis since the 21st century. The only exception was in the first half of this year, when LG Electronics surpassed Samsung Electronics in operating profit for the first time since the adoption of the International Financial Reporting Standards (IFRS) in 2009.

On the 10th, business circles and the securities industry forecast that although LG Electronics posted higher operating profits than Samsung Electronics in the first half, it will fall behind Samsung Electronics again in the second half. According to the consensus operating profit estimate for Samsung Electronics this year compiled by financial information firm FnGuide (the average of securities firms' estimates), it is 8.85 trillion won. Compared to last year's profit of over 43 trillion won, this represents an 80% shrinkage in just one year. However, considering that operating profit was only 1.24 trillion won in the first half due to the semiconductor market downturn, there is an expectation that achieving trillion-won-level profits again in the third and fourth quarters is possible.

Experts predict that Samsung Electronics could earn operating profits in the range of 3 to 4 trillion won in the third quarter and even more, around 4 to 5 trillion won, in the fourth quarter. This forecast assumes that the semiconductor sector, which began production cuts in the first half, will see the effects of these cuts fully materialize and the market conditions will improve. It is assumed that the semiconductor division's operating losses will shrink to around 2 trillion won in the third quarter and turn profitable in the fourth quarter. Samsung Electronics is estimated to have suffered operating losses of around 8 trillion won in the semiconductor division in just the first half of this year.

If semiconductors and mobile are the key factors determining Samsung Electronics' performance in the second half, LG Electronics' automotive components business is expected to play that role. LG Electronics announced that its provisional operating profit for the second quarter increased by 12.7% year-on-year to 892.7 billion won, surpassing Samsung Electronics, which reported 600 billion won in operating profit, for two consecutive quarters. The profitability expansion was driven by a structural improvement strategy in the home appliance business, which includes air conditioners and TVs, through proactive inventory adjustments, premium product-focused sales, and cost improvements. Additionally, the automotive components business, which was expanded after exiting the smartphone business, delivered results beyond expectations.

Considering that one-time costs related to voluntary retirement of employees in the second quarter are expected to have reached nearly 100 billion won, LG Electronics' actual profit in the second quarter is estimated to have exceeded 1 trillion won.

Despite the difficult management environment, LG Electronics has recorded sales exceeding 40 trillion won for two consecutive years and operating profits exceeding 2 trillion won for three consecutive years, marking the second-highest sales and third-highest operating profit in the first half in its history. The securities industry projects LG Electronics' operating profit for this year to be around 4.4 trillion won, expecting operating profits of about 1 trillion won in both the third and fourth quarters, which would result in record-high performance.

However, if this trend continues, even if LG Electronics achieves record-high profits in the second half through excellent operations, it is unlikely to surpass Samsung Electronics, which benefits from the 'semiconductor market improvement,' due to differences in business structure and scale. Dongwon Kim, a researcher at KB Securities, stated, "At the end of this year, the order backlog for the automotive components business of the three LG Group electronics affiliates is expected to reach a record high of 132 trillion won, a 26% increase from the previous year," and added, "In the coming years, LG's automotive components business will enjoy mid- to long-term growth driven by the expansion of the electric vehicle market."

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