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[Power Korea] LG grows into full-fledged global brand

Global biz portfolio widens from electronics, displays to chemicals

Jan. 28, 2013 - 19:59 By Korea Herald
Many still remember the black-and-white Gold Star televisions manufactured in the 1960s.

It was a symbol of wealth, since a large portion of middle- and lower-class families did not have the funds to buy such a costly television at the time. Instead they stuck to their old-fashioned radios ― which were also first introduced in the country by Gold Star, now LG, in 1959.

LG Group was founded as Lucky Chemical Industrial Corp., now LG Chem, in Busan, South Gyeongsang Province, in 1947.

Earning profits from its cosmetics and daily necessity businesses, it gave birth to its flagship unit Gold Star ― now LG Electronics ― in 1958.

LG Group, which was daring enough to take on different experiments over the next few years, enabled Gold Star to become the first in Korea to manufacture radios in 1959, as well as become the first black-and-white television maker in 1966.

It was also the first to export radios, shipping 62 units to the U.S. in 1962. The company claims this was a move that changed the fate of the Korean electronics industry.

“After the radio, then the electric fan, telephone, refrigerator, washing machine, air conditioner, cassette player and microwave followed suit, with Gold Star always at the forefront of the innovation,” said an LG official.
Illustration by Park Gee-young

In 1967, LG Group constructed Honam Oil Refinery, positioning it as the nation’s first private oil company.

As a result, it transformed into a conglomerate getting involved in a larger scope of projects such as in daily necessities and electronics as well as oil.

Two years after its transformation, late founder Koo In-hwoi passed away, with the chairman seat left to his eldest son Cha-kyung in 1970.

With the younger Koo taking charge of the conglomerate, it rapidly expanded its business portfolio into petrochemicals and precision manufacturing, creating what is now LG Innotek and LG Petrochemical. The petrochemical unit later merged with LG Chem in 2007.

It was in 1983 that Lucky Group, the name which was given in 1974, changed its brand name to Lucky Gold Star. However, it was changed again to LG Group in 1995.

Its corporate identity and its symbol were both reestablished with the introduction of LG Group and the appointment of its third chief Koo Bon-moo.

However, the 1997 financial crisis forced the conglomerate to toughen up and make restructuring efforts.

LG was notably the first among the chaebol to try out the holding company system in Korea. Motivated by the two founding families’ desire to simplify their complicated ownership structure, the move unveiled in July 1999 drew keen attention from chaebol regulators and analysts as well as chaebol peers.

The transformation into a holding company meant that it was willing to go after a new governance system that aimed to help boost efficiency and transparency through separating ownership and management.

The holding company system was launched in March 2003.

Following the establishment of its holding company system, the over-half-a-century partnership between the Koo and Hur families came to an end in January 2005.

The conglomerate had been established by late group founder Koo In-hwoi and his business partner Hur Joon-koo.

Then being the second-largest family-owned conglomerate, the Fair Trade Commission approved the break-up of 14 firms from LG Group, which became GS Holding Corp.

The firms included LG Mart, LG Home Shopping, LG-Caltex Oil Corp. and LG Engineering and Construction.

While still in the transformation stage, LG Display began mass production on a fourth-generation LCD manufacturing line ― becoming the industry’s first to do so in 2000. The fourth-generation LCD line manufactured LCD panels for 15-inch monitors, which many claim led a paradigm shift in the LCD industry.

The early investment injected in the fourth-generation LCD lines and the launch of 15-inch display panels for monitors became the turning point for the firm, taking over the No. 1 spot globally in 2002, which was previously held by Japanese firms.

On top of the LCD business for computer monitors, it took on projects for LCD TVs, running the sixth-generation line for large panels for TVs and monitors starting August 2004.

It added the seventh-generation production line in 2006, holding onto its top spot in the LCD TV market.

LG Display garnered a 22 percent share in the large LCD market in the first half of 2005, a decade after initial mass production at its first plant in Gumi.

This was possible due to the solid sales figures of its affiliate LG Electronics. The company was also the first to locate a production plant overseas, in Alabama in October 1982.

The flagship electronics arm also acquired U.S.-based firm Zenith in 1995, wowing the global electronics industry as Zenith was the top appliance firm in the U.S.

It also established a production headquarters in Russia in 2006, an addition to its increasing number of overseas offices, with the New York office being the first in 1968.

The company has now been spearheaded by the chairman’s younger brother Koo Bon-joon since 2010.

The year 2013 is now another fresh start for LG Group, which has a total of 63 affiliates with 11 of them listed as of Jan. 7.

Publicizing that green projects will take over 15 percent of total sales by 2020, LG chairman Koo Bon-moo also said that 20 trillion won ($18.6 billion) will be invested this year.

Of the total, 14 trillion won is expected to be used for facility investment and the remaining 6 trillion won will be poured into research and development, according to LG officials.

With its flagship smartphone Optimus G along with the 5-inch Vu series at the forefront of its mobile business, the 55-inch OLED TVs will be launched worldwide, and the 55-inch, 65-inch and 84-inch Ultra High Definition TVs will roll out in some 100 nations.

LG also aims at developing the technology for the 60-inch transparent OLED technology by 2016.

“It’s reality that we can’t expect growth or profits if we’re not the industry’s No. 1 firm in such an unpredictable business environment,” said Koo. “We must compete with an industry-leading product to create a new market with increased competitiveness.”

By Cho Ji-hyun (sharon@heraldcorp.com)