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Will Construction of Large Home Appliance Factories in US by Samsung, LG Be Needed?
Scope of Safeguard Targets
Will Construction of Large Home Appliance Factories in US by Samsung, LG Be Needed?
  • By Michael Herh
  • October 16, 2017, 07:15
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A bird’s-eye view of LG home appliance factory in the state of Tennessee, the US.
A bird’s-eye view of LG home appliance factory in the state of Tennessee, the US.

 

According to the electronics industry on October 15, the US International Trade Commission (ITC) will hold a public hearing on relief steps for import washing machines at its Washington office on October 19 (local time). It is said that the Korean government, Samsung Electronics and LG Electronics are expected to appeal to the ITC that the safeguard will raise prices of washing machines and ultimately cause US consumers to suffer damage finally.

The safeguard does not specifically apply only to Korean companies represented by Samsung Electronics and LG Electronics. However, with the exception of US home appliance Whirlpools, Korean electronics makers are the main targets as Samsung Electronics and LG Electronics' washing machine products follow Whirlpool in the US market.

Participants in a public-private joint-venture meeting and the home appliance industry said on October 11 that it was necessary to concentrate on excluding the application of overseas washing machine parts in a future safeguard that Whirlpool is petitioning. "We will emphasize that washing machines, premium washing machines and washing machine parts that are not produced in the US should be excluded from safeguard targets," said Kang Sung-cheon, assistant deputy industrial minister.

Samsung Electronics and LG Electronics are currently building consumer electronics factories in South Carolina and Tennessee, respectively in the US. If a company produces products in the United States, the company can avoid the application of a safeguard but if parts are included in the safeguard, the company will not be able to avoid the safeguard even if the company builds a factory in the US. This is because local production facilities do not produce parts directly but assemble parts from overseas to produce finished parts. It is impossible to have local parts production facilities. Furthermore, it is also problematic in terms of price competitiveness.

For this reason, it is pointed out that Samsung Electronics and LG Electronics do not need to build large home appliance factories in the US if a US safeguard targets even parts. "If a US safeguard applies even to parts, it will be necessary to reconsider reducing the sizes of factories factory that Korean companies are building,” said an official of a Korean home electronics company. “We are looking for ways to minimize damage by the safeguard as significantly as possible."

The Korean home appliance industry blamed Whirlpool’s petition for the safeguard on the fact that recently Whirlpool’s market share was trimmed and in particular, Whirlpool lost its rank to LG Electronics in the drum washing machine sector. Currently, Korean makers are increasing their market shares in the premium washing machine market in the US, while whirlpools are maintaining a high market share in the medium- to low-priced vertical-axis washing machine sector. The market of low-end washing machines is targeted by a number of countries including China so Whirlpool is feeling a sense of a crisis.

According to market researcher TracQline, Whirlpool owns other brands of home appliances such as Maytag and Kenmore, so the company recorded a 41% share in 2014, a 39% share in 2015 and a 38% share in 2016 in the US market. "Whirlpool claims that Korean companies steal US market shares from Whirlpool by artificially setting prices of their washing machines low. But the claim is not true," said an official of the Korean home electronics industry.