[Comprehensive] LGU+ "7x Revenue Growth in 5 Years... Discovering Smart Factory Solutions Telecoms Can Excel At"

Introducing Safe and Highly Productive 'U+ Smart Factory'
Leading the 5G B2B Market... Customer-Centered 'Jjinpan' Innovation

On the morning of the 16th, at a press conference held at the LG Uplus Yongsan building, Jae-yong Seo, Head of Smart Infrastructure Business (from left in the photo), Won-seok Jo, Head of Corporate New Business Group, and Young-seo Jeon, Head of Corporate Service Development, attended and answered questions.

[Asia Economy Reporter Seulgina Cho] "We will prioritize customers and discover smart factory services that telecommunications companies can best provide. Once implemented, we will offer excellent network coverage, stable mobility, rich experience and trust, and proven economic feasibility so that customers inevitably become true fans of LG Uplus."

LG Uplus unveiled its smart factory solution brand ‘U+ Smart Factory,’ which consolidates on-site demands from safety to productivity, and set a goal to expand related sales by up to seven times within five years. Following its core mobile network operator (MNO) business, the company is accelerating innovation to secure so-called true fans, as emphasized by CEO Hwang Hyun-sik, in the rapidly growing B2B (business-to-business) market.

◇ Launch of ‘U+ Smart Factory’... Targeting 7-fold Sales Growth

On the morning of the 16th, LG Uplus held an online press conference to unveil the smart factory solution brand U+ Smart Factory, which simultaneously pursues a safe working environment and high productivity. Unlike most factory automation solutions that have been Wi-Fi based, this solution supports wider coverage, uninterrupted stability, and enhanced security through 5G and LTE mobile communications. At the conference, Jae-yong Seo, LG Uplus Smart Infrastructure Business Director (Senior Executive Vice President), explained, "U+ Smart Factory is a solution that creates safe and highly productive smart factories," adding, "We plan and distribute solutions tailored to various industries and business scales."

LG Uplus aims to dominate the 5G B2B market through U+ Smart Factory. To this end, it plans to expand smart factory-related sales sevenfold within five years, maintaining over 40% annual growth and leading the market with differentiated value. Although LG Uplus did not disclose the exact sales target for the next five years at the event, it is estimated to exceed 100 billion KRW.

The smart factory solution proposed by LG Uplus can be summarized as a '5G, artificial intelligence (AI), and big data-based smart factory,' where the telecommunications company has strengths. What differentiates it from other telecom companies’ smart factory solutions is the ‘field.’ It is said that there are numerous references applied to actual operating factories, not just demonstrations or verifications.

Currently, LG Uplus is conducting over 200 projects at more than 150 sites for over 100 customers, including group affiliates. It has proven its competitiveness by building 5G and AI-based smart factories at group affiliates such as LG Electronics and LG Chem. LG Uplus’s solution was also introduced at LG Electronics’ Changwon plant ‘LG Smart Park,’ which held a completion ceremony and declared a transition to an intelligent autonomous factory system.

◇ Customer-Centric ‘True Fan’ Innovation in Smart Factory Solutions

The main solutions embody CEO Hwang’s true fan strategy, focusing on service and quality improvement at customer touchpoints. Unlike the ‘core’ mobile network operator (MNO) business, which worries about churn rates of transient customers, the B2B infrastructure market, including smart factories, inevitably maintains long-term relationships once infrastructure is established, whether good or bad. The strategy is to win the hearts of corporate customers from the start, build a foundation of long-term trust, and grow into a brand that can be recommended to other businesses.

LG Uplus noted that during the solution discovery process, there was a strong demand, especially from electronics factories, to diagnose major equipment failures in advance to enhance production efficiency without disruption.

Among the 12 solutions, the most representative ‘Motor Diagnosis’ solution diagnoses voltage and current of motors, key equipment in factories, based on big data and predicts failure signs in advance. Since a single failure can cause significant production disruption, this solution had the highest demand on-site. Another key solution, ‘Distribution Board Diagnosis,’ allows factory electrical managers to monitor the status of distribution boards remotely 24/7 without exposure to safety accident risks. It also reduces costs by more than 50% compared to wired networks.

Additionally, the AI-based ‘Intelligent Video Security’ enables safety managers to detect flames, smoke, steam, abnormal equipment temperatures, and unauthorized access to restricted areas without patrols. Alerts about abnormal situations can be received anytime, anywhere via a mobile application, and recorded videos can be reviewed.

The ‘Air Environment Diagnosis’ solution, which has high demand in chemical plants, measures the concentration of air pollutants emitted from factories and analyzes and predicts their movement and diffusion range. In chemical plants, preventing accidents such as chemical leaks or gas explosions is critical due to potential casualties and production stoppages. Moreover, recent government regulations have tightened, increasing the need for supervision and management of pollutants emitted during processes.

Director Seo emphasized, "We will make customers inevitably become true fans of U+ Smart Factory," adding, "We will provide a highly secure wired and wireless network, stable mobility, and flexibility to offer a ‘production environment free from location constraints’ that smart factories pursue." He confidently stated, "Through rich experience, we will provide customers with the most reliable solutions and enable cost-effective implementation."

◇ Smart Factory Solutions as a Cash Cow

LG Uplus is strongly driving smart factory solutions due to the high growth potential of the B2B market centered on smart factories. According to market research firm MarketsandMarkets, the global smart factory market size is expected to grow from $121 billion in 2016 to $205.4 billion next year, with an average annual growth rate of 9.3%. The core technology market applied to smart factories is projected to increase sixfold within five years.

Won-seok Cho, LG Uplus Corporate New Business Group Head (Executive Vice President), said, "We expect the ‘telecommunications company-led smart factory market’ to expand to about 100 billion to 200 billion KRW over the next five years," adding, "LG Uplus is pursuing a market share of over 50%."

LG Uplus is also considering supplying smart factory solutions not only domestically but also to overseas production bases. Such needs have been confirmed from corporate customers. However, since LG Uplus provides communication based on domestic mobile communication licenses, the key issue is whether overseas telecom companies can provide the same network as LG Uplus. Director Seo explained, "We are discussing market expansion with customers for areas where communication is not needed or only limitedly needed."

This move is also connected to CEO Hwang’s recent announcement to increase the non-telecom revenue ratio from the current 20% to 30% by 2025 and to secure capabilities such as AI solutions in the B2B sector, including smart factories. At that time, CEO Hwang identified six major fields forming the foundation of new businesses: AI, big data, cloud, security, content, and B2B solutions. The smart factory sector is playing a significant role as LG Uplus’s new cash cow. In the second quarter, total corporate solution business sales grew 34.3% year-on-year and 35.8% quarter-on-quarter.

In particular, LG Uplus is evaluated to have secured market competitiveness as a domestic telecom operator with strengths in building 5G infrastructure characterized by ‘hyper-connectivity’ and ‘ultra-low latency,’ while also leveraging the manufacturing base of group affiliates. Synergy effects with group affiliates strong in manufacturing and system integration (SI) are also expected. LG Uplus is an optimized company for businesses providing related infrastructure and solutions.

Regarding whether the smart factory solution business overlaps with group affiliates such as LG CNS, Executive Vice President Cho said, "LG CNS focuses on factory automation solutions, while LG Uplus focuses on discovering and applying solutions in areas where synergy can be created," adding, "We collaborate with LG CNS and LG Electronics’ production development research institutes."