LG Electronics, the Decisive Reason for Moving TV Production to Indonesia is 'Labor Costs'

LG Electronics 48-inch 4K OLED TV

[Asia Economy Reporter Dongwoo Lee] LG Electronics has decided to relocate part of the TV production line at its Gumi plant to Indonesia, which is analyzed as a decision to secure cost competitiveness. The company explained that it aims to reduce labor costs and enhance competitiveness in the global TV market.

According to the electronics industry on the 23rd, LG Electronics recently officially announced the relocation of 2 out of 6 TV production lines at the Gumi plant to Indonesia. The plan is to complete the relocation of the production lines in the second half of the year and prepare for local production as early as the beginning of next year.

LG Electronics plans to expand product manufacturing capacity through the relocation of production lines and develop Indonesia as a key TV production hub in the Asian region. The Gumi plant will produce some of the highest-end premium products, such as the rollable TV scheduled for release in the second half of the year.

The industry interprets this decision as a proactive response to the global expansion of demand for LG Electronics' main product, organic light-emitting diode (OLED) TVs. It is judged that the company can reduce the rising cost rate caused by the previously high-cost structure by utilizing lower labor costs compared to domestic costs.

According to market research firm Omdia, global OLED TV sales are expected to increase to 9.5 million units in 2024. LG Electronics also explained that the relocation of production lines could significantly improve production efficiency.

LG Electronics' TV division (HE) sales in the first quarter of this year were 2.9707 trillion KRW, down about 4.8% compared to the same period last year (3.1215 trillion KRW). In particular, there is also an analysis that the premium line of OLED TVs could be hit if the global economic recession caused by the novel coronavirus infection (COVID-19) prolongs.

The company plans to increase productivity and efficiency at major production bases such as Cibitung in Indonesia, Mława in Poland, and Reynosa and Mexicali plants in Mexico in the future.