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| LG Chairman Koo Bon-moo |
"LG has partnered with Toyota in telematics parts," a senior LG Electronics executive said, Friday. "The pact calls for LG Electronics to supply some parts to be used in telematic systems in Toyota's latest connected vehicles, which will be available for consumers in the United States and Europe."
Telematics is a portmanteau of two words ― telecommunications and informatics. Telematics in a broad sense is any integrated use of telecommunications with information and communications technology.
It is the technology of sending, receiving and storing information relating to remote objects such as vehicles via telecommunication devices, according to LG.
The executive said the value of the deal is about "a few million dollars."
"Although the size of the deal isn't that huge given LG's relatively weak position in the vehicle components business, the deal has some significant meaning for LG as the LG-manufactured car parts passed tough qualification tests by Toyota," the executive said.
Strategy Analytics (SA), a market research firm, said LG was the biggest telematics components supplier for the third straight year from 2013 to 2015. By 2015, its global share in the sector was 29.9 percent from 30.3 percent in 2014, the SA data said.
In a recent management reshuffle, several hundred at LG's ailing smartphone division were moved to its vehicle component division.
LG said this was because the smartphone industry is expected to be increasingly competitive with the entrance of cheaper Chinese products and a consumer shift to less-pricey handsets but with competitive hardware specifications.
Business shift
After LG Electronics' top management decided its smartphone business is less promising, the country's second-largest consumer electronics company has increasingly looked to new growth areas such as cars.
While LG Electronics' home appliance and television businesses are looking good, the company has been accelerating efforts to diversify, focusing on vehicle component-related fields.
LG has moved its European headquarters to Frankfurt because the German city has long been regarded as the "test-bed" for the global automotive industry, with leading car makers including key LG clients, such as BMW and Mercedes-Benz, having operations there.
Stock market analysts expect LG's vehicle components unit to report over 600 billion won in sales in the second quarter of this year due to growing demand for in-car mapping and entertainment systems. By 2018, sales are expected to rise to 4 trillion won.
"LG's vehicle components business will gradually be replacing the smartphone unit and we believe such a business transition may pay off given the number of car clients that other LG Group affiliates have, for example, LG Display and LG Chem," said HMC Securities analyst Noh Geun-chang. He said the vehicle components business will become profitable in 2018.
LG Electronics signed a deal last year to sell 11 core parts to General Motors for its electric car, the Chevrolet Bolt EV.
"LG Electronics will develop discussions with more Chinese car manufacturers to trim pending issues before making additional business deals," a company spokesman said, adding it expects the vehicle component business to grow "measurably" over the next few years.
LG Electronics reported 14 trillion won in sales during the second quarter of this year. Operating profit for April-June was 584 billion won.
Its TV and home appliance divisions fared well, but the company's smartphone business extended its losing streak for the fifth straight quarter.
Source: KoreaTimes
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