"Restructuring Around 'Subscription' Business... Aim to Convert Half of Existing Customers into Subscribers"
"45% of Domestic First Half Performance Came from Home Appliances... Striving for Strong Results in Second Half as Well"
Ryu Jae-cheol, President of LG Electronics H&A (Home Appliances & Air Solution) Business Division, stated on the 25th that the company will not raise product prices despite the potential cost increase of the newly installed AI chip 'DC-Q' in LG Electronics UP (Up) Appliances 2.0 products.
Ryu made these remarks during a Q&A session at the UP Appliances 2.0 press briefing held at LG Science Park in Magok, Gangseo-gu, Seoul, in the morning. Present at the event were Ryu, Lim Jeong-su, Executive Director of H&A Rental Caring & Subscription Business, Lee Hyang-eun, Executive Director of H&A CX (Customer Experience), and Park Tae-in, Head of H&A Smart Control Research Institute.
On this day, LG Electronics announced that it had developed the AI chip DQ-C and the appliance OS (operating system) for UP Appliances 2.0 smart appliances. These are the results of over three years of research and development (R&D). The plan is to apply the DQ-C chip primarily to premium products this year and expand it to all entry-level products next year.
Concerns were raised that applying the DQ-C chip and OS might increase manufacturing costs and component prices, leading to higher product prices. Ryu said, "When voice recognition and OS are installed, costs inevitably increase by at least several tens of dollars, so we have long been considering the need to develop a chip with price competitiveness, and we are now realizing that effort. However, we have no plans to raise prices simply because we applied a new OS or added hyper-personalization features."
Ryu Jae-cheol, President of LG Electronics H&A (Home Appliance & Air Solution) Division, explains the 'UP Appliance 2.0' business on the 25th at LG Science Park in Magok, Gangseo-gu, Seoul. [Photo by LG Electronics]
The UP Appliances 2.0 business is a crucial venture to realize the 'Smart Life Solution Company' vision announced by LG Electronics CEO Cho Joo-wan on the 12th. Cho stated that the current sales level of approximately 65 trillion KRW will be increased to 100 trillion KRW by 2030.
Regarding this, Ryu said he plans to convert half of LG Electronics' current customers into UP Appliances subscription customers. Ryu stated, "To provide a (customer-tailored hyper-personalized) customer experience, it is impossible to maintain a one-time sales relationship between LG Electronics and customers," adding, "We will shift subscriptions to our main business." He continued, "At least more than half of the current customers will be converted," and said, "We believe and are preparing to achieve this in a short period."
The UP Appliances subscription service offers terms divided into 3, 4, 5, and 6 years. There are concerns that frequent appliance replacements could reduce LG Electronics' sales. Ryu explained, "Durable products like refrigerators and washing machines are usually used for more than 10 years, but with subscriptions, replacement cycles shorten, so overall demand for LG Electronics will increase, but replacement demand may also rise," adding, "We are considering methods such as refurbishing products after subscription completion or early termination."
On this day, LG Electronics showcased washing machines and dryers equipped with UP Appliances 2.0. These devices are designed so that apps can be deleted and reinstalled like on smartphones. Just as smartphone users download or delete different apps depending on their device, users can create and use their own 'personalized UP Appliances.' Ryu said, "Since last year's launch, we have introduced 60 types of UP Appliances and over 250 upgrade contents, more than half of which were developed by reflecting over 10,000 customer suggestions," adding, "As a result, cumulative sales reached 2.5 million units as of this month."
Ryu did not provide specific details about LG Electronics H&A division and UP Appliances-related performance during the event. However, he hinted that UP Appliances are highly profitable, accounting for about half of the H&A division's performance. Ryu said, "In the Korean market, about 45% of first-half sales came from UP Appliances," adding, "In the first half, we achieved results through UP Appliances, Objet Collection, and other premium appliances." He continued, "I do not expect a sharp improvement in second-half performance," and said, "If we continuously prepare focusing on UP Appliances 2.0 and premium products, I think we can perform reasonably well in the second half."
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