LG sharpened its skis – Newspaper Kommersant No. 196 (7397) of 10/21/2022

The South Korean manufacturer of household appliances LG plans to close a plant in the Moscow region and transfer production from Russia: the company chooses between Uzbekistan and Kazakhstan. In Uzbekistan, negotiations were held with Artel, which also produces Samsung equipment. Since 1998, LG has already had a factory in Kazakhstan, but it closed a few years ago. The transfer of production to Uzbekistan is more profitable due to cheap labor, but there are more solvent consumers in Kazakhstan, experts say.

A Kommersant source in the household appliances market said that the leadership of the South Korean LG is discussing the possibility of closing a plant in Russia (produces refrigerators, washing machines and televisions) and transferring production to Uzbekistan at Artel facilities. According to him, part of the top management of Russian LG has already been relocated to Tashkent. TecomDaily CEO Denis Kuskov is also aware of the plans to move. Artel Electronics “Kommersant” specified that at the moment there is no partnership with LG, and information about the negotiations is not disclosed.

Meanwhile, the interlocutor of Kommersant in Kazakhstan says that LG is negotiating with the authorities of this country. Since 1998, LG has already had a factory in Almaty operating there (it produced the same assortment as the Russian one). But a Kommersant source close to the government of Kazakhstan said that the plant was closed several years ago, and now the country’s Ministry of Digital Development, Innovation and Aerospace Industry is discussing with LG the opening of a new one. Kommersant sent a request to the ministry. Tatyana Shakhnes, director of LG for PR in Russia, did not respond to calls and messages from Kommersant. The company’s global office did not respond to a request either.

After the outbreak of hostilities in Ukraine in February, manufacturers of electronics and household appliances began to stop deliveries of products to the Russian Federation, LG did this in mid-March (see Kommersant on March 18). The American Whirlpool (which produced Indesit, Whirlpool, Hotpoint equipment in the Lipetsk region) sold assets in the Russian Federation to the Turkish Arcelik (Blomberg, Beko equipment, etc.) (see Kommersant dated June 28). The German Bosch began looking for a buyer for its business in the country (see Kommersant on August 22), the results of the negotiations are unknown. At the same time, new brands began to appear in Russia. Thus, M.Video-Eldorado announced that it would sell Artel equipment, at the facilities of which Samsung is also produced (see “Kommersant” dated July 7).

According to Holodilnik.ru, in January-August, the share of LG in the Russian Federation in the segment of washing machines was 17% (for the same period in 2021 – 22%), refrigerators – 10% (against 12%), TVs – 7.8% ( 15.2%. Shares continue to fall rapidly, according to the retailer. LG management must make some decision about the fate of production in Russia, Finam analyst Leonid Delitsyn believes. “There are 80 enterprises operating in Uzbekistan, jointly with Korean companies. According to the results of pre-revolutionary and Soviet history, 200 thousand Koreans live in the country, so the diverse business ties between the two countries should not be surprising,” the analyst notes. In his opinion, the transfer of production to Uzbekistan will be more profitable than to Kazakhstan, due to cheaper labor. But, says Mr. Delitzin, Kazakhstan’s market is more attractive due to significantly higher per capita incomes.

Alexey Pogudalov, commercial director of Holodilnik.ru, doubts that LG will move to Uzbekistan: “Artel has no free capacity, and the question of implementation as a whole also arises.” The plant in the Moscow region, according to him, was set up to sell products in the Russian Federation and neighboring countries, while the overwhelming volume was produced specifically for Russia: “In the event of a blockage in deliveries to the Russian Federation, production will have to be reduced by four to five times.” A Kommersant source in the Kazakh market believes that it is unprofitable for Artel to cooperate with LG, since in this case the Korean brand will compete with Artel itself.

Timofey Kornev, Alexander Konstantinov, Astana