LG Electronics to increase capital spending by 35% this year More than half of total allocated to its electronics component-making unit
Translated by Ryu Ho-joung 공개 2022-04-06 08:09:47
이 기사는 2022년 04월 06일 08:06 thebell 에 표출된 기사입니다.
LG Electronics is increasing capital expenditures this year by more than a third compared to a year ago as the South Korean tech giant looks to solidify its leading position in the home appliance market and invest in future growth.LG Electronics, the crown jewel of the country’s major conglomerate LG Group, plans to spend 4.29 trillion won ($3.53 billion) on capital expenditures in 2022, up 35% from 3.18 trillion won in 2021.
More than half of the total, or 2.34 trillion won, is allocated to LG Innotek, the company’s subsidiary that makes electronics components such as camera modules and integrated circuit substrates, and other capital projects. The amount represents a 50% increase from the year before.
LG Innotek is gearing up to expand its production capacity to grab a bigger market share. It plans to pour about 1.46 trillion won to build new plants and facilities in the first quarter alone, with up to an additional 80 billion won expected to be spent on capex in the second half of the year.
LG Innotek’s share in the camera module market has grown from 15% to 25.8% in 2021. The company has sold more to Apple, its largest customer, as other suppliers of the iPhone maker were impacted by production suspension due to the pandemic. Its share in the IC substrate market has also increased to 16.7% from 12.2% in the same period.
Focus on current and future growth drivers
On a non-consolidated basis, LG Electronics is to spend 1.95 trillion won on capex this year, up 20% from 1.55 trillion won from a year ago. Its Vehicle component Solutions (VS) unit and its mainstay Home appliance and Air solution (H&A) business collectively account for 78% of the total.
About 668 billion won, or a third of the non-consolidated total, is allocated to the VS unit, which LG Electronics hopes to drive its future growth. The amount represents a 46% increase from 456.3 billion won in 2021, with the company continuing to heavily invest in the unit over the past years.
The VS unit, which provides telematics solutions and AVN (Audio, Video, Navigation) systems, is expected to double down on its efforts to turn profitable this year after it was affected by a global chip shortage that slowed production of new vehicles last year. It made revenue of 7.19 trillion won last year, representing 9.6% of the company’s total revenue.
The H&A unit, which makes household appliances such as refrigerators, washing machines and air conditioners, will spend 851.9 billion won on capex this year, up 10% from the year before and the largest 43.6% allocation among the company’s four business units.
As part of efforts to cement its leading position in the global home appliance market, the company’s H&A unit plans to use its smart appliance control app, LG ThinQ, to expand the customer base. The unit’s revenue of 27 trillion won accounted for 36.3% of the company’s total revenue in 2021.
In contrast, LG Electronics reduced this year’s capex allocated to its Business Solutions (BS) unit by 8 billion won to 100.3 billion won. The BS unit closed its solar panel business earlier this year, and the outlook of the markets for monitors and information displays remains unpredictable.
The capex allocated to the company’s Home Entertainment unit, which makes TVs and audio devices, slightly increased to 291.3 billion won this year from 313.1 billion won in 2021. (Reporting by Hyun-ji Sohn)
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