LG Electronics' profit drops by half as Trump tariff panic hits TVs

LG Electronics reported a nearly 50 percent drop in operating profit for Q2 2025, citing weak consumer demand and increased trade costs.

An LG Electronics campaign video plays on a digital billboard in Times Square in New York on June 4. [NEWS1]

LG Electronics’ operating profit dropped by nearly half in the second quarter of 2025 from the previous year as consumer spending slowed ahead of anticipated U.S. tariffs under the Donald Trump administration.

The company’s TV business, already under competitive pressure from Chinese rivals, proved to be a major weak point.

LG Electronics on Monday released a provisional earnings report for the second quarter of this year, reporting 20.74 trillion won ($15.1 billion) in revenue and 639.1 billion won in operating profit. These figures represent year-over-year declines of 4.4 percent in revenue and 46.6 percent in operating profit.

Operating profit underperformed already low analyst expectations. Analysts had forecast that operating profit would come in between 850 billion and 900 billion won, down around 25 to 29 percent from a year earlier.

The company attributed the decline to sluggish consumer sentiment and rising trade-related costs.

“Delays in consumer recovery in major markets, along with shifts in U.S. trade policy, increased tariff-related costs and intensified competition,” LG Electronics said.

While the company’s home appliance divisions — including washers, refrigerators and heating, ventilation and air conditioning (HVAC) systems — performed relatively well, the TV segment struggled. TV demand weakened, while marketing and liquid crystal display (LCD) procurement costs increased.

A TV is produced at LG Electronics’ Gumi A3 plant in Gumi, North Gyeongsang, in 2019. [LG]

China-made TVs account for 58 percent of the global market, according to the Korea Institute for Industrial Economics & Trade (KIET). The United States currently imposes tariffs of 41.4 percent on those imports and also levies 55 percent tariffs on Chinese refrigerators and air conditioners and 38 percent on washing machines.

Korean manufacturers like LG Electronics and Samsung mostly produce TVs for the U.S. market in Mexico, where zero tariffs still apply under the United States-Mexico-Canada Agreement, which even had some analysts expecting Korean electronics to benefit from steeper tariffs on Chinese products.

But in reality, LG Electronics’ TV business took a heavy hit.

“The problem appears to be more about demand than tariff rates by country,” said Kim Jong-ki, senior research fellow at KIET. “With global demand still weak and trade policy uncertainty growing, consumer sentiment has sharply deteriorated.”

Industry officials also point to cost structure.

Unlike Chinese companies that focus on LCD TVs, LG Electronics and Samsung emphasize organic light-emitting diode models to maintain a technological edge. But LCD TVs still dominate the global market, with LG Electronics purchasing them from Chinese supplier BOE.

The company’s TV business remains more exposed to supply and pricing volatility. In the first quarter of 2025, 38 percent of LG Electronics’ TV division’s raw material costs went toward LCDs. For refrigerators and washing machines, LG Electronics produces its own key components, such as compressors and motors, which gives it greater control of pricing and quality.

However, the worst may be yet to come.

Tariffs on steel components used in refrigerators and washing machines — up to 50 percent — will take effect in the second half of the year.

The company’s strategy now hinges on defending profitability in the business-to-consumer appliance sector while expanding business-to-business offerings like heating, ventilation and air conditioning (HVAC) for data centers and electric vehicle components.

LG Electronics also plans to strengthen recurring revenue streams through its subscription services and webOS platform. “Our core appliance products continue to lead the premium market, and subscription-based services combining products and aftercare are also growing steadily,” the company said. “With logistics costs easing compared to late last year, we aim to maintain a healthy profit structure and minimize the impact of tariffs.” The company added that it would finalize the acquisition of European hot water solutions firm OSO and expand its footprint in the European HVAC market.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY SHIM SEO-HYUN [paik.jihwan@joongang.co.kr]