Samsung, LG executives hope for recovery in second half after recent slump

Samsung Electronics and LG Electronics blamed the economic slump for their recent earning shocks and voiced their hope for a recovery in the second half.

Samsung Electronics CEO Han Jong-hee speaks during a press conference with Korean reporters on the sidelines of CES 2023 in Las Vegas on Jan. 6. [SAMSUNG ELECTRONICS]

LAS VEGAS — Samsung Electronics and LG Electronics blamed the economic slump for their recent earning shocks and voiced their hope for a recovery in the second half.

The two biggest electronics makers in Korea recently announced an estimated plummet in operating profit for the fourth quarter of last year, amid the slumping sales of electronics and home appliances.

"We did expect such a performance amid the economic downturn and continuous uncertainties," Samsung Electronics CEO Han Jong-hee said on the sidelines of the CES 2023 in Las Vegas on Friday.

"The not-so-good economic situation will likely continue in the first quarter, and is expected to rebound in the second half, hopefully."

Han's remarks came a day after the company announced a 69 percent decline in operating profit in the fourth quarter of 2022 in its earnings guidance.

The preliminary estimate of 4.3 trillion won ($3.3 billion) is the worst quarterly operating profit since the third quarter of 2014, far below a consensus estimate of 6.9 trillion won compiled by FnGuide.

Visitors line up in front of Samsung Electronics' booth at the CES 2023 trade show. [YONHAP]

"In times of difficulty, like now, Samsung always focuses on our originality, which is innovation," Han added. "We are seeing robots and metaverse as our growth engines."

Samsung Electronics brought eight start-ups to this year's CES electronics show, which belongs to its C-Lab. C-Lab is a program that fosters start-ups, both from the company and from outside.

The start-ups include Polkamix, which runs a metaverse concert platform that allows people to communicate with their favorite singers at home, and Neubility, a delivery service using autonomous robots.

LG Electronics reported even poorer performance, with estimated operating profit plunging 91.2 percent to 65.5 billion won in the fourth quarter.

It is the first time in four years that the electronics maker posted a quarterly operating profit less than 100 billion won.

LG Electronics CEO Cho Joo-wan speaks on the sidelines of the CES 2023 trade show in Las Vegas on Jan. 6. [LG ELECTRONICS]

"We should've reduced the production volume, such as for display panels, as demand fell and the price of raw material increased. But we failed to do that," LG Electronics CEO Cho Joo-wan said. “We are now in the process of balancing them out, and it will need time — until the end of the first half.”

"The situation will start getting better probably in the second half," Lee said. "We will concentrate more on the North American market, the area which may see the fastest recovery."

An automotive parts business may be one that LG can rely on to improve its earnings.

“The automotive parts business is expected to have turned to profit last year, with annual sales exceeding 10 trillion won," Cho said.

"We predict it will surpass 15 trillion won by 2026," Cho added. “If we could log in 20 trillion won, we would be able to call ourselves a leading player in the world market.”

LG Electronics’ vehicle component business swung into the black in the second quarter of last year for the first time since 2016.

LG recently announced that it will jointly work with Magna International to develop autonomous driving technologies. The two companies have been building a $100-million EV component plant in Mexico after forming a joint venture in 2021.

Visitors line up in front of LG Electronics' booth at the CES 2023 in Las Vegas on Jan. 5. [NEWS1]

The Korean company also focuses on its content business as one of its future growth engines.

“TVs are no longer just hardware, they are making new business models,” Park Hyoung-sei, head of LG Electronics’ home entertainment division. “We recently announced a partnership with Paramount, and we are trying to provide premium content to our customers who have smart TVs.”

Britain and Ireland will be the first to have the service.

LG Electronics will release new original content series in collaboration with Apple TV+ this summer.

“Despite the economic downturn, LG will not downsize our investments in the new business areas where there is a high potential,” Lee added.

When asked about the recent reports about LG supplying parts to Apple for the Apple Car project, CEO Lee said, “I can’t say anything because there is nothing actually going on.”

“What I can say is that, even if it’s not with Apple, we have all capabilities and portfolios to cooperate with any company for cars.”

BY SARAH CHEA [chea.sarah@joongang.co.kr]