LG Elec to bet on healthcare, mobility, metaverse in N.America

LG Electronics Inc., the global top home appliance maker, will bet on the healthcare, mobility and metaverse sectors in North America through investments in startups for partnerships as the South Korean company is trying to diversify its business into new businesses for future growth in its second-largest market worldwide.

LG Electronics has recently selected the connected health, e-mobility infrastructure and metaverse as new growth engines in the region with an aim to secure fresh sources for stable profits in the next five to 10 years, industry sources in Seoul said on Sunday.

Connected health is a socio-technical model for healthcare management and delivery with technology for remote service, while e-mobility represents the concept of using electric powertrain technologies, in-vehicle information, communication technologies and connected infrastructure for the electric propulsion of vehicles and fleets.

The South Korean tech giant chose nine startups to develop those new businesses in partnerships with a plan of an initial investment of $20 million. It is also expected to play a role as corporate venture capital.

LOOKING FOR MORE STARTUPS

“We are looking for more startups to nurture new businesses together,” said an LG Electronics official.

“We will make many new attempts beyond traditional industrial sectors based on the open innovation,” the official said, referring to a strategy to promote an information age mindset toward innovation that runs counter to the secrecy and silo mentality of traditional corporate research labs.

LG Electronics is expected to increase investments in North America to make the region its strategic base for new businesses, industry sources said.

The company logged 17.7 trillion won ($13.4 billion) in sales last year in North America, the second-largest by region.

LG Technology Ventures, the venture capital unit of South Korea’s fourth-largest conglomerate LG Group, is actively investing in startups in Silicon Valley.

The venture capital arm, founded in May 2018, has invested $260 million in 52 startups so far, according to the group.

It spent more than a third of the total investment on artificial intelligence, autonomous driving, batteries and others that could help the group find new business opportunities and create synergy with affiliates.

Inword AI, a production platform of virtual characters for virtual reality and augmented reality, was one of the beneficiaries of LG Technology Ventures’ investments. Duality Technologies Inc., which addresses privacy issues stemming from AI research, also secured money from the venture capital unit.

LG Technology Ventures injected more funds into promising startups. It provided funds three times to Element Energy Ltd., which has battery management system (BMS) technology.

The venture capital arm, in which LG Electronics, LG Display Co., LG Chem Ltd, LG Uplus Corp. and LG CNS, had managed $425 million when it started the operations. Its fund increased to $480 million on investment from LG Energy Solution Ltd. and LG Innotek.

SUCCESS OF AUTOMOTIVE ELECTRONICS, EV BATTERY BUSINESS

LG Group, which has been investing in various new industries for more than a decade, started enjoying rapid growth in those sectors such as automotive electronics and electric vehicle batteries.

LG Electronics’ vehicle component solutions (VS) division, which handles the company’s automotive electronics business, considers a 2023 target of double-digit growth in sales from a predicted record revenue this year.

The company expects the division’s sales to grow 23.8% to 8.9 trillion won in 2022 from a year earlier.

“The automotive electronics unit’s sales are predicted to make up more than 10% of the total for the first time this year,” said another LG Electronics official.

The unit is expected to cope with growing economic uncertainties such as a global downturn and higher interest rates, given the increasing demand for car parts and active new projects of automakers, according to the company.

LG Electronics secured a total of 8 trillion won in orders in the first half, including deals to supply in-vehicle infotainment systems and high-performance telematics for luxury carmakers such as Mercedes-Benz and BMW.

Such a performance came on synergy with the group affiliates – EV battery maker LG Energy and camera module producer LG Innotek.

LG Energy, the world’s No. 2 player in the sector, raised its sales target for this year to 25 trillion won, some 40% higher than the 17.9 trillion won in 2021, when it unveiled the third quarter earnings last month. That was the second upward revision of its sales target.

The group aims to further nurture the automotive electronics and battery businesses as key future profit sources with active investments.

“We realized that a new business is a real money pit in the beginning but it could become a core sector with proper investments and cultivations like automotive electronics and batteries,” said a group official. “More group executives calls for the development of other new business, which could bring another success.”

Write to Ji-Eun Jeong and Jeong-Soo Hwang at jeong@hankyung.com
Jongwoo Cheon edited this article.