In preparation for the upcoming electric vehicle era, LG Group is tightening the reins by continuing to make bold investment decisions to strengthen the automotive electronic parts business. In particular, synergies in the group’s electrical equipment business are drawing attention as the company decided to produce electric vehicle parts by establishing a joint venture with Magna International, the world’s third largest auto parts maker.
It is interpreted as a strategy to create synergy through convergence business by bringing together the capabilities of all affiliates in the future, focusing on the electric field business. This seems to reflect the “selection and concentration” management stance of LG Group Chairman Kwang-mo Koo, who has preemptively strengthened the portfolio of new businesses to secure future survival engines despite uncertain conditions.
LG Electronics decided to establish a joint venture’LG Magna E-Powertrain’ with Magna in the field of electric vehicle powertrain (power transmission system) through a temporary board meeting on the 23rd. LG Electronics has 100% stake in the newly established company by physically dividing part of the green business of the Electronic Components (VS) division, and Magna takes over 49% of the stake. The acquisition amount is 453 million dollars (about 516 billion won).
If this joint venture passes the general shareholders’ meeting in March next year and is officially launched in July, it is expected to accelerate its attack on the eco-friendly vehicle and electric parts market. Magna’s rich business know-how and global customer network powertrain engineering capabilities are expected, while LG Electronics possesses motor and inverter manufacturing technologies, which are key parts of electric vehicle powertrains.
A business official said, “We will focus on strengthening LG Electronics’ electronic equipment division through a joint venture.” “The way the method is being realized.”
■ LG Electronics-Magna joint venture, expects synergy with group electrical solutions
The LG Group is completing the roadmap for electronic devices through investments, mergers and acquisitions (M&A), and discovery of next-generation electronic parts. Each LG affiliate business includes a connected ecosystem based on mobile and other electronic devices and the Internet of Things (IoT), electric vehicle batteries, telematics for vehicle communication parts, organic light-emitting diode (OLED) displays, and autonomous driving solutions based on next-generation communication technology. Is running.
LG Electronics established the VS Business Headquarters in 2013 to foster the auto parts business as a cash cow (cash source). In 2018, it invested about 1 trillion won to acquire ZKW, an Austrian automotive headlamp manufacturer. ZKW also possesses technology for mass production of next-generation headlamps, and has customer networks such as BMW, Benz, Audi, and Porsche. At the end of 2019, the vehicle lamp business within the VS business division was transferred to ZKW and integrated.
Starting from the launch of this joint venture, LG Electronics will promote the auto parts business through a triangular system such as ▲VS business headquarters (focus on infotainment) ▲ZKW (lamp) ▲LG Magna e-powertrain (powertrain).
The VS business division continued to suffer losses for several quarters, but diligently increased transactions and narrowed the gap until it turned to a surplus. The launch of this new corporation is also expected to contribute significantly to enhancing competitiveness.
Stock prices are predicting that LG Electronics’ electronic electronics business will turn to the black in the third quarter of next year.
Given that LG Electronics and Magna’s solution integration, multiple patents, and already secured customers from European automakers, LG Electronics’ electric vehicle parts orders are expected to increase significantly after the incorporation.
Park Kang-ho, a researcher at Daishin Securities, said, “At the time of full growth in the electric vehicle market, the demand for e-powertrain components such as motors and inverters is expected to increase rapidly.” It seems that it has made a favorable decision to reduce its market share and reduce its market share.”
LG Chem, which has grown to become the number one global electric vehicle battery company, officially launched LG Energy Solutions as a subsidiary this month by dividing the battery business unit. It is evaluated that Chairman Koo made a bold spin-off decision to secure new funds and increase production capacity in accordance with the rapidly growing electric vehicle market. LG Energy Solutions aims to achieve 30 trillion won in sales by 2024.
LG Display is supplying plastic organic light-emitting diodes (POLEDs) related to the electronics sector. Along with the increase in vehicle displays, the number of in-vehicle POLED applications has increased, leading to increased orders from automakers. The company plans to develop a variety of vehicle displays and strengthen its targeting in the electric vehicle market by taking advantage of POLED’s low power and light weight.
LG Innotek produces high-value vehicle lighting modules, advanced driver assistance systems (ADAS) cameras, and vehicle power modules such as DC/DC converters. LG Uplus has recently demonstrated the world’s first 5G mobile communication-based autonomous parking technology, and is spurring to strengthen the capabilities of future mobility solutions including autonomous driving.
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As LG Group achieves vertical integration of supplying electronic solutions of these subsidiaries to meet the needs of automobiles, attention is also drawn to Synergy, a new joint venture between LG Electronics and Magna.
A business official said, “We are looking forward to the organic synergy of this joint venture and the battlefield capabilities of affiliates accumulated throughout LG Group.” Researcher Park said, “LG Group is expected to rise to a full-fledged sales growth trajectory next year due to the turnaround of the electronics business and the new growth of the group.”