“We are currently discussing the certification processes to enter NVIDIA's server supply chain ecosystem. In line with the artificial intelligence (AI) technology revolution led by big tech companies, including Microsoft, we aim to supply more than three times the product volume compared to last year.”
Lee Jae-sung, head of LG Electronics' Eco Solution (ES) business unit, noted at a press briefing held on the 8th at LG Science Park in Magok, Gangseo-gu, Seoul. On this day, LG Electronics unveiled to domestic media the site where solutions for heating, ventilation, and air conditioning (HVAC) are applied for the first time.
LG Electronics plans to actively foster its business-to-business (B2B) operations, including HVAC, to diversify its portfolio. Amid intensified competition with Chinese corporations in its existing key markets such as home appliances and TVs, concerns have been raised about declining profitability, indicating an urgent need for business restructuring. LG Electronics recorded an operating profit of 639.1 billion won in the second quarter, a 46% decline compared to the same period last year.
To this end, LG Electronics previously reorganized its HVAC business from the Home Appliance (H&A) business unit to the ES business unit. Based on its HVAC business, including chillers and CDU, it aims to achieve sales of 20 trillion won by 2030. The plan is to expand the supply of HVAC products for AI data centers, including the key component, chillers.
LG Electronics explained that it is expanding its production bases to enhance the production capacity of HVAC solutions. The ES division currently has 12 global production sites, including Korea and China, and operates a total of 70 HVAC academies. Recently, it has begun construction on its third local factory in Sri City, India.
The vice president stated, “We are pursuing a localized complete system to target each global South country and are continuously expanding our HVAC academies,” and added, “Once the third factory in India is completed, it will be the 11th and 13th factories, enabling us to produce an additional 1.5 million air conditioners and 2 million compressors.”
He also mentioned, “In the second half of this year, we plan to create another development lab equivalent to the one in Changwon” and pointed out, “Currently, a significant number of Indian personnel are coming to Changwon for training, and we are fostering them so that they can directly conduct development after returning to their home country.”
Additionally, he stated, “As there are many external variables, we will prepare by creating a flexible supply system for our overseas production bases to actively respond to external changes,” and noted, “The demand for AI data centers is increasing significantly, and this trend is expected to continue until 2028.”
LG Electronics also plans to expand its collaboration with OSO, which it recently acquired. Last month, LG Electronics signed a contract to acquire 100% equity in OSO, a European premium water heating solutions company. The vice president said, “Since the brand OSO is already well-established in the European premium sector, we plan to leverage this strength,” adding, “Combining LG Electronics' R&D capabilities, we will lead the market and expand our territory from Northern Europe to Southern Europe and Canada.”
LG Electronics is also on alert regarding the rapid growth of Chinese HVAC corporations. Recently, Chinese corporations have been narrowing the gap in both cost competitiveness and quality and technology levels with global companies. LG Electronics aims to strengthen its non-hardware competitiveness against Chinese corporations through maintenance monitoring systems.
Bae Jeong-hyun, head of the SAC division, stated, “Although China is catching up with its competitors through overwhelming economies of scale, moving forward, the ability to provide maintenance and engineering services will be more important than simply selling products,” and added, “This is a weakness for China, so we will provide localized services by leveraging our strengths, including our 12 global production sites and over 70 academies.”