LG Electronics to bolster B2B to transform into software company

LG Electronics Inc., South Korea’s home appliance giant, will expedite its push to transform from a white goods manufacturer into a digital solution company with more focus on business-to-business sales for more steady income even during economic downturns.

According to LG Group on Monday, LG Electronics will strive to bump up its B2B sales to more than 40% of its entire sales in 2023 versus an estimated 25% the previous year under the direction of its chief Cho Joo-wan who took the helm of Korea’s leading electronics company in December 2021.

Cho has been spearheading reform in LG Electronics’ business structure with more emphasis on the development of competitive software platforms, services and content programs that can fit in not only LG Electronics’ own appliances and services but also its peers and rivals’ services.

“Non-hardware businesses will unlock the opportunity to reinforce our corporate value,” Cho said during his visit to CES 2023 in January, adding that it is important to connect devices through platforms and revamp its service business model.

CEO Cho is urging the company to lower its reliance on hardware with a warning that LG Electronics’ current prowess in hardware manufacturing does not guarantee its leading position in the global market a decade from now.

LG Electronics is expected to enhance B2B platform businesses not only in its new growth drivers such as robotics, automotive electronics and EV charging solutions but also in its flagship home appliance and TV divisions.

SOFTWARE TO LEAD APPLIANCE GIANT’S FUTURE GROWTH

LG Electronics last year raked in 1.1 trillion won ($823.8 million) in operating profit from its appliance and TV businesses, of which about 30% was from non-hardware sales. The company has set a goal to earn more than 40% in profit from B2B service, platform and content sales this year.

To meet the goal, LG Electronics will focus on creating added value by enhancing B2B businesses of its four divisions -- Home Appliance & Air Solution (H&A), Home Entertainment (HE), Vehicle Component Solutions (VS) and Business Solutions (BS).

The company is promoting its webOS, a multitasking operating system for its smart TVs and other mobile devices, to create additional profit from its TV sales. LG Electronics can receive commissions from over-the-top media services like Netflix or share TV commercial fees with them by adding such TV streaming apps to LG's webOS.

TV set makers without their own smart operating systems can pay LG Electronics to use its webOS in their TVs.  

LG Electronics is also focusing on enhancing its robotics software to meet various demands from customers of not only its CLOi delivery and logistics robots but also robots developed by other companies.

With such advancements, the company aims to become a leading robotics software company, with its CLOi robots serving as a testing and development tool for its universal robotics platforms.

Thanks to its efforts to enhance B2B businesses, its TV platform sales zoomed more than tenfold in 2022 from 2018, while its appliance rental sales hit 743.5 billion won last year, growing at a compound annual growth rate of 36% since 2018.

LG Electronics also seeks to enhance commercial display content management programs and EV charger controlling solutions.

KEEN TO HIRE SKILLED SOFTWARE DEVELOPERS

LG Electronics has stepped up recruiting software developers for each division to speed up its transformation into a digital solution company.

Its BS division is currently hiring 10 experienced program developers, including one that can develop a cloud service for remote management and maintenance of its clients’ digital signage displays.

LG Electronics is also looking for a talented developer that can design cloud- and artificial intelligence-based streaming services to enable its users to create targeted and customized TV commercials through the analysis of viewers’ favorite programs and viewing behaviors.

Its H&A division in charge of home appliance sales is recruiting video and audio recognition software developers that can analyze audio data and deal with cloud server data, while HE selling TVs is hiring data analytics professionals.   

All these efforts suggest that LG Electronics is preparing to create a massive smart home platform that can connect its appliances to control them remotely.

Write to Jeong-Soo Hwang and Ye-Rin Choi at hjs@hankyung.com

Sookyung Seo edited this article.