LG Electronics’ B2B sales this year expected to double from 2020

LG Electronics Inc. [Photo by Han Joo-hyung]

LG Electronics Inc. is expected to see high growth from its business-to-business division as corporate customers are less affected by economic conditions than those facing individual consumers that are spending less on home appliances amid mounting inflationary pressure and global recession concerns.

The company’s sales from its B2B division is projected to account for 32 percent of total revenue this year, more than doubling from 16 percent in 2020, according to the electronics and securities industry Tuesday. LG Electronics’ sales this year is estimated to grow 2.6 percent to 85.66 trillion won ($65.2 billion), market data tracker FnGuide’s consensus forecasts.

LG Group Chairman Koo Kwang-mo has been nurturing the B2B business to diversify the company’s business portfolio. Koo was also behind the reinstatement of the Business Solution division that oversees the B2B business. The division, which was established in 2009, merged into the Home Entertainment division in 2011 but was separated into an independent business unit in 2018. Koo has also been investing heavily in the electric devices and parts business.

“LG Electronics is expected to generate on average 1 trillion won in operating profit per quarter on the back of B2B sales, which are less sensitive to economic conditions,” said Kim Dong-won, head of research at KB Securities Co.

LG Electronics’ focus on the B2B business comes as it is relatively unaffected to an economic downturn compared with the business-to-consumer business. That’s why the B2B business can act as a new cash cow when consumer demand has weakened due to inflationary pressure.

“The B2B business has large unit sales and is relatively less affected by market fluctuations than consumer goods,” said an unnamed official from the industry. Another strength of B2B is that it easily leads to a long-term business relationship once a deal is closed with a corporate customer.

LG Electronics’ CLOi robots. From left: Guide Bot, Servebot(drawer type), and Servebot(shelf type) [Photo provided by LG Electronics]

As a result, the proportion of B2B business is increasing in all divisions of LG Electronics. The B2C business targeting individual consumers had been the main source of revenue for the company’s Home Appliance & Air Solution division, but its B2B sales has grown recently for built-in home appliances and commercial air conditioning and heating systems. The industry expects sales of built-in appliances to account for more than 20 percent of total home appliance sales this year from more than 10 percent in 2021.

The HE division, which is in charge of TVs, is intent on growing its platform business targeting corporates. The strategy is to serve as a bridge between companies and consumers through its TV products. The company gets fees from over-the-top media platforms, such as Netflix Inc. and Watcha Inc., for pre-installing their apps in TVs. The electronics giant has more than doubled its sales target for this year’s platform business from the previous year, according to sources.

Robotic and electric vehicle charging, which LG Electronics has chosen as its new growth engine, are also services that target business customers. The Business Solution division operates robotic, EV charging services and digital signage business, among others. Industry insiders project the company’s sales from the robot business this year to double.

The EV charging service that begins in earnest this year is also expected to contribute to sales of the division. LG Electronics also has a plan to initiate one-stop sales of network equipment, logistics robots and integrated control systems by taking advantage of its fifth-generation specialized network.

The company’s vehicle component solutions division, which produces EV parts, is at the center of the B2B business. It is on a steep growing curve as its order backlog for this year alone is estimated at 100 trillion won. The division supplies infotainment systems, telematics and EV parts to global carmakers.