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LG, Samsung undergo shakeups

Posted: 22 Oct 2010 ?? ?Print Version ?Bookmark and Share

Keywords:consumer electronics? cell phones? LCD? semiconductors?

And for the most part, Samsung is still the darling of South Korea. In contrast, rival LG Electronics has taken a back seat to Samsung and other foreign competitors, prompting a number of changes in the group. In recent times, LG Electronics fell behind in smart phones and LCD TVs. It also reportedly scrapped plans to sell a previously-announced tablet PC because the product was not competitive.

Report on LG
As a result, Yong was replaced by Koo Bon-joon. ''It is rare for a CEO to be replaced before December within LG Group, and we interpret this as meaning LG Electronics is in a difficult situation and needs to find an urgent solution before things worsen further,'' said Brian Sohn, an analyst with HSBC, in a recent report.

''Despite Q4 2010 earnings improvement, the market has been concerned over 1) CEO focusing too much on (return-on-invested capital) , which has reduced investment for the future; 2) executives from outside slowing the decision-making process; and 3) LG Electronics' leadership weakening within LG Group, even though LG Electronics is the flagship company,'' Sohn said.

The new CEO should correct the major issues at the company. ''We believe that (he) is the right person for the job of CEO as most of the company's problems are related to lack of execution, which could be solved if there is strong leadership, which Koo has demonstrated in his role as CEO at LG International,'' he said in the report.

''Investor confidence on LG Electronics is very low since the company has failed to execute for the last year, especially in the areas of smart phones and LCD TVs,'' he said. ''We believe the new CEO could bring 1) a faster decision-making process enhancing execution, 2) improvement in supply chain management based on his leadership in LG Group; and 3) acceleration of new businesses such as solar cells, LED lighting, and B2B-related business.''

Koo Bon-joon has already vowed to change LG Electronics' culture, according to reports. Earlier this month, LG Electronics got the ball rolling by announcing new executives to lead its home entertainment and mobile communications companies.

He tapped Havis Kwon, executive VP, LG, to lead the company's home entertainment company. Kwon has led home entertainment's LCD TV division since 2007. He also appointed Jong-seok Park, current head of mobile R&D, to head-up LG's mobile communications (MC) company. Skott Ahn, formerly president and CEO of LG's MC company, will take over the role of chief technology officer (CTO). Woo Paik, the outgoing CTO, takes on a newly-created role at LG responsible for identifying and developing new businesses.

It remains to be seen if LG Electronics will re-enter the semiconductor business. Koo Bon-joon was said to have been an executive at LG's former chip unit, LG Semicon.

In 1983, a Korean DRAM maker called Hyundai Electronics Industries Co. Ltd. was formed. The company was merged into LG Semiconductor Co. Ltd or LG Semicon in 1999. In 2001, the combined entity was renamed Hynix Semiconductor.

Koo Bon-joon is reportedly interested in taking over Hynix. But burned by its past and unsuccessful exploits in ICs, LG's board has balked. Plus, LG's board believes that it will assume too much debtand will require too much capital-to buy Hynix.


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