LG Group has begun to reexamine the production strategies of its key manufacturing subsidiaries amid the spread of the COVID-19. Last year, the company began to diversify the import sources of electronic materials and components following Japan’s export restrictions against Korea. Now the group is expanding import source diversification efforts to other areas, including the chemical and pharmaceutical sectors.
The group’s major manufacturing affiliates such as LG Electronics, LG Chem, LG Display, LG Innotek, and LG Household & Healthcare have begun to examine their global supply chains due to concerns about disruptions in materials and parts supply from China due to the spread of the new coronavirus.
LG believes the supply chain risk from the COVID-19 is greater than that from the Japanese export restrictions. “In fact, Japan's export regulations did not affect our production strategies as the restrictions were limited a couple of products,” an LG official said. “On the other hand, the COVID-19 is an issue in China, which accounts for 30 percent of LG Group's overseas production. We are taking the issue seriously because it may disrupt the production activities at our subsidiaries."
As a result of this, the group is seeking a full-scale change in its production strategy to reduce its dependence on materials and components from certain countries or companies, not only in the electronics sector but also in the chemicals and pharmaceutical sectors.
“The most important point in the reexamination of our production strategy is how to increase the proportion of localized materials and components," said an official of an electronics affiliate. “We will focus on supporting and fostering Korean suppliers rather than directly making them.”