LG Electronics, Next Year's Market Outlook 'Clear'... "Automotive Division Profitability to Improve Compared to This Year" (Comprehensive)

Next Year, Demand for Home Appliances and TV Markets Both Increase
Focus on High-Value Products in Automotive Electronics Market
"No Impact on Automotive Electronics from North American Strikes"

LG Electronics has given a positive outlook for the market next year. It expects demand to increase not only for home appliances and TVs but also for IT products such as PCs and laptops. For the automotive components business, which has become a new growth engine for the company, it anticipates that the order backlog could reach 100 trillion KRW by the end of the year. The company forecasted that the related market will continue to grow and profitability could also improve.

On the 27th, during a conference call following the Q3 earnings announcement, LG Electronics stated, "global demand for home appliances is expected to shift to a moderate growth trend starting next year." It explained that while demand for refrigerators and washing machines may slow down this year, there are factors that could increase demand regionally next year. This suggests that the H&A division, which handles home appliances, could see improved performance.

A view of LG Twin Towers in Yeouido, Seoul, on the 7th, ahead of LG Electronics' preliminary announcement of its fourth-quarter earnings for last year. According to the securities industry, LG Electronics is expected to record sales in the 20 trillion won range and operating profit in the 800 billion won range in the fourth quarter, driven by strong sales of home appliances and TVs. Photo by Kang Jin-hyung aymsdream@

Although there are concerns about low growth in the North American market, demand could increase due to replacement of aging homes and economic stimulus measures such as the Inflation Reduction Act (IRA). Demand in Europe may remain stagnant, but some growth is possible driven by replacement demand focused on entry-level and high-efficiency products. In South Korea, despite an overall unfavorable macro environment, LG Electronics plans to target demand in areas with growth potential such as online and B2B rental markets.

The TV market, related to the HE division, is also expected to show a recovery in demand starting next year and continue to grow for a certain period thereafter. LG Electronics said, "We are striving to respond swiftly to changes in the market environment by not only monitoring industrial demand forecasts but also establishing local distribution collaboration systems by region," adding, "We aim to overcome the impacts of macroeconomic changes and expand growth in the TV business."

For OLED TVs, sales may decline this year due to the global economic slowdown and geopolitical risks in Europe, the main market, which are affecting demand for both entry-level and premium products. However, the long-term outlook including next year is positive. The company stated, "We expect to recover to a mid-teens growth rate starting next year," and predicted, "The transition from LCD to OLED will accelerate, sustaining a high growth rate for a considerable period."

The PC and laptop markets, linked to the Business Solutions (BS) division that handles IT devices, are expected to gradually recover from the fourth quarter. However, ongoing inflation and delays in demand recovery due to international geopolitical uncertainties could pose risks. The company said, "We plan to closely monitor market changes and respond promptly."

The automotive components market, which has become a new growth driver for the company (VS division), is expected to continue growing due to the electric vehicle effect. LG Electronics anticipates that the VS division’s order backlog could reach 100 trillion KRW by the end of the year. The company explained that this is possible because new order activities are progressing successfully. Regarding the expected proportion of major business areas, it forecasted, "The infotainment backlog will account for about 60%, electric vehicle parts 20%, and automotive lamps around 10%."

The profitability of the VS division is also expected to improve. Regarding the VS division’s operating profit margin outlook, the company said, "the pace of profitability improvement will be gradual," and "profitability next year will improve compared to this year." It also stated, "In the mid to long term, we expect profitability to exceed mid-single digits (4-6%)." LG Electronics said that the VS division’s annual sales will exceed 10 trillion KRW for the first time this year and plans to focus on high value-added parts demand alongside the acceleration of the electric vehicle transition.

Meanwhile, regarding concerns about prolonged labor strikes at North American automakers such as GM and Ford, LG Electronics said, "Based on our supply plants, we have not detected any order reductions due to labor strikes," and "So far, we believe there will be no significant impact on our business."

Regarding concerns arising from the gradual growth of the Chinese home appliance industry, the company explained, "We are working on clarifying short- and mid-to-long-term strategies by country." Taking into account market size and the pace of Chinese competitors’ advances, LG Electronics plans to "readjust resource allocation priorities." It also stated, "We will maintain current profitability levels by focusing on new growth engines, continuously strengthening the B2B business, and advancing the portfolio through new business initiatives."

Earlier, LG Electronics announced that its consolidated operating profit for Q3 was 996.7 billion KRW, up 33.5% year-on-year. Sales for the same period were 20.7094 trillion KRW, down 2.2%. Operating profit exceeded the securities market consensus estimate of 888.2 billion KRW, while sales were below the estimate of 23.1052 trillion KRW. LG Electronics attributed the improved performance to the expansion of the B2B business and increased operating profit in home appliances and automotive components.

LG Electronics stated, "We plan to accelerate the business portfolio transformation in Q4," adding, "We will expand sales of key products entering the year-end peak season and continue B2B growth based on the automotive components business to sustain sales growth." It further added, "We will secure a stable profit structure through efficient business operations based on precise demand forecasting."

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