LG Chairman Kwang-mo Koo (right), who entered an electric vehicle at the LG Electronics Design Center in Yangjae-dong, Seoul in February of last year, looking at a clothing manager for vehicles. LG provided
LG Group frequently does not disclose the sympathy or photos of LG Chairman Kwang-mo Koo. It is said that there is an influence on the character of Koo who prefers to work in silence and in silence.
There is a move of Chairman Koo who was notified of such LG from outside. It is a management activity related to the’automobile electronics (electrical and electronic devices)’ of Chairman Koo. In February of last year, Chairman Koo visited the LG Electronics Design Center in Yangjae-dong, Seoul. At that time, Chairman Koo said that he looked at various products such as LG Electronics’ smart door, wall-contact OLED (organic light-emitting diode) TV, connected car, and digital cockpit (instrument panel). The picture that LG distributed to the media was a picture of Chairman Koo inspecting the clothes manager installed in the’Connected Car’. In the industry, it was said that “Chairman Koo and the LG Group are very interested in electric and electronic equipment.”
There was a recent case of showing a picture drawn by Koo and LG Group on the automotive electronics business. On the 23rd of last month, LG Electronics decided to establish a joint venture’LG Magna E Powertrain’ in the field of electric vehicle powertrain in partnership with Magna International, Canada, which is considered one of the world’s top 3 parts makers. LG Electronics will physically divide the green business in charge of driving systems (motors, inverters, reducers, etc.) from the VS division in charge of auto parts. And it plans to hand over 49% of the shares of the spin-off corporation to Magna for 453 million dollars (about 500 billion won).
Magna is a business-to-business (B2B) company that is not widely known to the public. It is an auto parts company that is recognized for its technological prowess so that it not only supplies to BMW, but also collaborates with global information technology (IT) companies several times. There are various business fields such as exterior system, powertrain, seat system, mirror, and lighting. It also manufactures cars such as BMW, Daimler, Jaguar Land Rover, and Toyota. Magna says on the homepage that “We have commissioned 29 vehicles for 39 years.”
In recognition of its technology, it is said that it will compete with Taiwan’s Honghai for consignment production of electric vehicles by Apple. Magna also made the body of the electric vehicle concept car’Vision S’that Sony of Japan unveiled at’CES2020′ in January last year. What is the reason that Magna invested 500 billion won in LG Electronics and established a joint venture?
LG Electronics’ ’60-year motor’ pride
LG Electronics”motor’ competitiveness is considered. The pride of LG employees”motors’ is great. When I first interviewed the electronics industry one year and eight months ago, a senior LG Electronics executive asked a reporter, “What is the greatest competitiveness of LG Electronics’ home appliances?” To a hesitant reporter, the executive stressed, “The power of LG home appliances comes from the motor.” Referring to LG Styler and competitors’ products, he emphasized that “Styler has a performance that cannot be compared to competitors’ products that spray air because the motor moves directly to remove dust from clothes.”
LG Electronics first developed the motor in 1962, 60 years ago. This was the time when Geumseongsa made the motor for the fan. Since then, LG Electronics has been recognized for its technology by introducing the world’s first inverter technology-based’DD Motor’ in 1998. The DD motor is a structure in which the washing bin and the motor are directly connected without a belt, and there is no structure that transmits power in the middle, so energy loss, noise, and vibration are low. DD motors for washing machines were also the first in the industry in Europe to have a 22-year lifespan.
LG Electronics Smart Inverter Motor
In 2000, it developed the world’s first linear compressor and mass-produced refrigerators equipped with it in 2001. Unlike conventional compressors that used to rotate, the’inverter linear compressor’ reduces power consumption by allowing linear motion. General compressors convert the rotational motion of the motor into linear motion to compress the refrigerant, resulting in energy conversion loss, but linear compressors have no energy loss because the motor itself performs linear motion, and there is no connection part that causes friction and wear. LG Electronics explains that it can significantly reduce noise. LG Electronics is focusing on the development of motors and compressors with the Power Electronics Research Center located in the H&A business division in charge of household appliances.
The electric vehicle motor business is a project in which LG Electronics’ motor technology is implanted. LG Electronics created the Energy Components (EC) business division in August 2011, and is placed under the direct control of the CEO. The EC division united the parts-related organizations scattered in the H&A division and the AE (air conditioning and energy) divisions at the time. The electric vehicle motor development organization will also be absorbed by the EC division. It reflects the philosophy of LG’s management that’competitiveness of finished products comes from motors’. The research and development of electric vehicle motors, which have been intermittently conducted since the late 2000s, is in full swing.
Supplied electric vehicle motors to GM and Jaguar
In July 2013, the’VC Business Headquarters’ (now the VS Business Headquarters) in charge of the automotive electronics business was launched at LG Electronics. The EC division in charge of electric vehicle parts will enter the VC division along with the’car division’ in charge of infotainment parts for vehicles and the’V ENS’, an automobile parts design company under LG CNS. And even after the name was changed to VS Business Headquarters, the electric vehicle drive system (motor, inverter, etc.), which was part of the’Green Business Division’ organization, joined hands with Magna through this material division.
Since 2010, LG Electronics has consistently supplied motors for electric vehicles to automakers. In 2010, it supplied electric motors to the’raceti premier’ electric car, which was first developed by GM Daewoo. In 2015, it was selected as a driving motor supplier for Chevrolet Volt electric vehicles by GM of the United States, and its technology was recognized. After that, LG Electronics will build up performance by supplying drive motors for Jaguar I-PACE electric vehicles.
GM’s electric vehicle Volt EV. Hankyung DB
Magna is also interested in LG’s electric vehicle drive motor
Magna decided to invest 500 billion won in equity with LG Electronics’ electric vehicle motor competitiveness in mind. The industry’s response is’positive’. Key competitiveness in the era of electric vehicle popularity is △electric vehicle fuel economy, △initial acceleration, quietness, and smooth deceleration △durability of the powertrain (a system in which a motor and inverter are modularized), which is the largest proportion of electric vehicle cost. This means that not only the technology of individual parts but also the performance of the whole powertrain system must be harmonized. We believe that if LG Electronics’ component competitiveness is combined with Magna’s strength in powertrain, it will create synergy.
Because of’safety’, automakers value the’delivery performance’ and’business ability’ of parts makers. It is also evaluated that LG Electronics has opened a way to more easily access foreign automakers with the establishment of a joint venture with Magna.
On the 29th of last month, Nomura Securities in Japan raised the target price from 110,000 won to 200,000 won, saying, “LG Electronics will be able to create new value in the fast-growing electronic equipment business.” (Current stock price is 135,000 won)
Expectations for the VS business division’s performance are also growing. Inside and outside of LG Electronics, it is said that the VS business division’s sales, estimated to be around 5.5 trillion won last year, can reach 7 trillion won this year and 10 trillion won next year. Operating profit is also expected to turn to the black this year.
LG’s prospects for M&A attempts at automotive electronics companies
It is predicted that the establishment of a joint venture between LG Electronics and Magna’electric vehicle powertrain’ is only the beginning of LG’s electronic equipment business expansion. Senior LG officials have repeatedly mentioned the importance of the battlefield business in official and informal occasions and are not hiding their will for large-scale mergers and acquisitions (M&A). LG also has experience in acquiring ZKW, an Austrian automotive headlamp company in August 2018 (70% stake in LG Electronics, 30% stake in LG Corp.).
There is no shortage of live ammunition. Since the inauguration of Chairman Koo, LG has implemented a strategy of’selection and concentration’ in earnest and has sold fingerprints with some business units. When 500 billion won from the sale of the stake in the Magna Daesang enters in July next year, LG’s cash holdings are expected to reach about 11 trillion won.
The connected car that LG Electronics exhibited at’CES 2020′ held in Las Vegas in January last year. Provided by LG Electronics
Some say that if LG attempts to M&A for the electronics business, the target will become a’automotive semiconductor company’. Not small likelihood. However, the cash held by LG is insufficient to catch the big fish for automotive semiconductors such as NXP and ST Microelectronics in Europe. In October 2016, Qualcomm, an American telecommunications semiconductor company, promoted the acquisition of NXP, with a purchase amount of 47 billion dollars (about 51 trillion won). The deal was eventually broken in 2018 when the’National Market Supervisory Authority’, which serves as the Fair Trade Commission in China, did not approve the acquisition.
Reporter Hwang Jeong-soo [email protected]