Demand for Premium Products Strong
LG Electronics will increase its output of household appliances for the first time in five years. The company has been suffering an output reduction as it continued to scale back production of low-priced products due to a price war with Chinese companies. But this year, the company is ramping up production because it is enjoying strong sales in all of its product segments including new home appliances and premium organic light emitting diode (OLED) TVs.
The H&A Business Division which manufactures refrigerators, washing machines, and air conditioners, and the HE Business Division responsible for producing TVs posted record high plant operation rates during the first quarter of this year, according to LG Electronics's first-quarter report. The company's air conditioner factory operated at 136.7 percent in the first quarter, up from 112.5 percent in the same period last year, as sales have already surged with hot summer forecast this year. The washing machine plant, which also produces dryers and stylers, operated at 105.6 percent in the first quarter, up from 85.2 percent a year ago, while the operation rate of the refrigerator plant rose to 113.9 percent from 96.1 percent. The TV plant operated at 102.1 percent in the first quarter, up from 92.3 percent a year ago, as OLED TV sales exceeded 4 million units.
The production volume of major consumer electronics products has also soared. LG Electronics's H&A Business Division and HE Business Division rolled out a total of 15,204 units in the first quarter of 2019, recording the first increase in five years since 2014. LG Electronics's home appliance production peaked at a quarterly average of 16,072 units in 2014 and had dropped to 13,854 units in 2015, 13,779 units in 2016, 13,663 units in 2017, and 13,276 units in 2018. The company withdrew from production of low-priced products in the face of competition from China. LG Electronics' annual household appliance production capacity shrank 28.7 percent from 80.237 units in 2014 to 57,161 at the end of last year.
However, strong sales of its household appliances have led the company to scale up production volume again. "In the case of washing machines, sales of new appliances such as dryers and stylers have increased. Air conditioners have become a household appliance for all seasons,” an LG Electronics official said. "This year, we have been increasing the production volume of premium TV models this year as demand for high-end TVs such as OLED TVs and nanocell TVs has been on the rise."