The operating rates of home appliance and smartphone factories of Samsung Electronics and LG Electronics declined in the first quarter. As the global economic downturn continued to reduce demand, companies adjusted production volumes to manage inventory.
According to the quarterly reports released by Samsung Electronics and LG Electronics on the 16th, the operating rates of home appliance and smartphone factories in the first quarter dropped by about 10 percentage points compared to last year. Samsung Electronics' DX (Consumer Electronics & Mobile) division's video device operating rate was 77.1%, down 7.2 percentage points from 84.3% in the first quarter of last year. The mobile device (HPP) operating rate fell 15.8 percentage points from 81% to 65.2%.
LG Electronics' HE (TV) business division operating rate decreased by 12.5 percentage points from 87.8% to 75.3%. The H&A (Home Appliances & Air Solution) division also saw declines compared to a year ago: refrigerators at 111.8% (previously 126.5%), washing machines at 90.1% (98.6%), and air conditioners at 120.8% (129%), dropping by 8 to 15 percentage points.
The home appliance industry responded by lowering operating rates to reduce inventory piled up in warehouses due to poor product sales. In fact, lowering operating rates had the effect of managing inventory. Samsung Electronics' DX division inventory assets, excluding semiconductors, decreased by 1.8% from 20.1901 trillion KRW at the end of last year to 19.8208 trillion KRW in the first quarter of this year. The Display (SDC) division's inventory assets also decreased by 21.5% to 1.0714 trillion KRW.
LG Electronics' inventory assets as of the end of the first quarter stood at 9.8324 trillion KRW. The inventory turnover ratio, calculated by dividing sales by inventory assets, rose from 6.1 times in the first quarter of last year to 6.3 times in the first quarter of this year. A higher turnover ratio means that unsold inventory is reduced and the speed at which inventory assets convert into sales accelerates. An LG Electronics official stated, "We are flexibly adjusting factory operations considering changes in market demand."
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