LG Electronics announced on May 20 that it will relocate two of its six TV production lines in Gumi, South Korea, to Indonesia within this year to improve management efficiency.
The company's move goes against the recent trend towards reshoring, but the company says the decision is inevitable to increase profits in its TV business.
LG Electronics’ Gumi factory currently produces OLED TVs, LCD TVs, and monitors for computers among others. LG Electronics is planning to move two of these lines to its plant in Cibitung, Indonesia and increase the overseas plant’s production capacity by 50 percent, making it a key TV production base in Asia.
The Cibitung factory was completed in 1995 and currently produces TVs, monitors, and signage products. LG Electronics plans to automate the plant’s production processes from assembly to quality inspection and packaging.
The Gumi factory, which will be reduced to four lines, will focus on mass production of high-tech premium TVs such as rollable and wallpaper TVs.
"The relocation of the production lines is aimed at strengthening the company’s regional TV production system with the Gumi plant playing the role of a mother factory,” an LG Electronics official said. “We will supply TVs to Asia from Cibitung, Indonesia, to Europe from Mlawa, Poland and to North America from Reynosa, Mexico."
Meanwhile, LG Electronics moved its smartphone production line from its Pyeongtaek plant in Gyeonggi Province to the Haiphong plant in northern Vietnam in 2019.
The relocation of the production lines is expected to help LG Electronics maintain its gap with Chinese followers to some extent. Chinese producers, including HiSense, TCL and Xiaomi, are rapidly increasing their shares in the global TV market based on low labor costs and subsidies from the Chinese government. Although LG Electronics held 18.7 percent of the TV market in the first quarter of 2020, up 2.2 percentage points from a year earlier, it was largely attributable to Chinese companies’ production disruptions kindled by the spread of COVID-19.
As the normal operation of LG Display's production line for OLEDs in Guangzhou, China, has been delayed due to the impact of the pandemic, it is essential for LG Electronics to secure cost competitiveness. Analysts say that it was necessary to relocate the plant to narrow its gap with Samsung Electronics, which will launch products such as QD display and micro LED TV models in 2021.