LG Electronics streamlines organization, diversifies business

Samsung Electronics accelerates AI shift and structural reform

A lifestyle image of a Samsung Electronics OLED TV. The image is not directly related to the article. [Provided by Samsung Electronics]
A lifestyle image of a Samsung Electronics OLED TV. The image is not directly related to the article. [Provided by Samsung Electronics]

South Korea's electronics and home appliance industry is pursuing a painful structural overhaul to break out of a prolonged slump. LG Electronics posted cumulative operating profit of more than 4 trillion won ($2.99 billion) through the third quarter of this year — a first in the company's history — while Samsung Electronics is also accelerating a broad restructuring of its business.

According to Yonhap, LG Electronics' combined operating profit for the first three quarters of this year surpassed 4 trillion won, marking the first time the company has crossed that threshold over a nine-month period.

LG Electronics has recorded strong year-on-year growth in both sales and operating profit every quarter this year, outpacing not only last year's weak results but also those from two years ago.

Solid performance in its core home appliance and electronics businesses, alongside growth in business-to-business operations and new ventures, drove the overall results.

The Media Entertainment division, which oversees the TV business, posted an operating loss of 750.9 billion won last year, but has since turned around — recording operating profit of 370 billion won in the first quarter and 220 billion won in the second — raising expectations of a full-year profit.

The Home Solution division, which handles home appliances, is also expected to sustain its growth momentum despite softening global demand.

The strong performance across these units reflects the results of structural improvements that LG Electronics consistently pursued even during last year's downturn.

Amid weak sales last year, LG Electronics launched a voluntary redundancy program at the Media Entertainment division — its first in two years — as part of a broader effort to slim down the organization. This year, the company tightened its belt further, requiring executives to fly economy class on trips of fewer than 10 hours.

Alongside its top-tier OLED lineup, LG Electronics has added a premium LCD category and is diversifying its business model around its smart TV platform. In home appliances, the company has defended its share in the premium segment while building global manufacturing competitiveness through smart factories.

The company is also tailoring its business strategy by region to address both high-value demand and future growth opportunities simultaneously.

Samsung Electronics saw continued weakness in its electronics and home appliance business in the third quarter, but is using the moment to accelerate a company-wide structural overhaul. The consumer electronics division posted an operating loss of 800 billion won in the previous quarter — its first since the company's founding — and analysts expect the losses to have continued into the third quarter.

Estimates suggest the mobile and network division recorded a loss of around 1.5 trillion won, while the TV and home appliance divisions combined for a loss of around 500 billion won, weighed down by a sharp rise in semiconductor and key component costs.

Against this backdrop, Samsung Electronics has laid out a two-pronged strategy to navigate the crisis: an AI-driven transformation and a broad structural overhaul.

The company introduced external generative AI tools into its operations for the first time and has committed to converting its domestic and overseas production facilities into AI-autonomous factories by 2030. To shed low-margin businesses and sharpen its focus on core competencies, it halted TV and home appliance sales on the Chinese mainland in May.

Samsung Electronics has also discontinued production of low-value-added home appliances or shifted them to outsourcing, concentrating its resources on premium products.

More recently, the company launched an internal career platform called "My Skills," which analyzes each employee's capabilities at the skill level and supports their professional development. The platform allows employees to build their competencies while exploring new career opportunities within the company.

"Domestic home appliance makers are facing unprecedented cost pressures and geopolitical uncertainty while ceding ground to Chinese rivals," an industry official said. "Bold strategic shifts and structural reform may be the only way to turn this crisis into an opportunity."


kimstar@heraldcorp.com