Premiumisation is at the Seoul of LG

AVForums Editor Phil Hinton visits LG’s home in South Korea

by Phil Hinton Apr 21, 2013 at 5:20 PM

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    Premiumisation is at the Seoul of LG
    The LG story is one that has seen a brand known for budget electronics and toothpaste transform into a company aiming to achieve the global number one position in Consumer Electronics.
    Back in 1947 the company then known as Goldstar focussed on chemicals and not high-end televisions. Over the last 65 years and following a number of name changes, LG are the world’s second largest CE company behind Samsung and comfortably ahead of the rest. The toothpaste however, is now history.

    The change in brand perception is very important to LG who are aiming for the higher-end of the TV market in 2013 and beyond. Those with long memories will perhaps be surprised to hear such a quote. After all, many AVForums members will remember Lucky Goldstar, with their cheap and sometimes nasty CRT TVs. However the last five or so years have seen incredible growth for LG alongside their name change to Life’s Good.

    The force of change and the innovation the company have adopted is nothing short of astounding considering their short (for CE companies) history. And it was the company size, energy and innovation that I have taken away from this press trip more than anything else. I have experienced their turn around in fortunes in the TV market for a number of years now, testing their latest models and feeding back our thoughts on what they could improve. And they are a company who have been listening intently to their customers, making sure that suggested changes have improved the product from generation to generation. Added to this is the huge investment in R&D development of new technologies; something that has seen them launch the worlds first commercially available OLED TV in both the Korean and UK market, way ahead of their competition.

    It is not just TV where LG invests heavily in R&D and aims for innovation. Did you know that they are the number one global washing machine manufacturer? Did you also know that in the UK their home appliances are more expensive than most of the competition, yet achieve high sales numbers? Up until this Press trip I didn’t know that either. I also didn’t know that LG has a chemicals company among 70 odd other subsidiary businesses and that this spirit of innovation and R&D is just as proactively pursued in the many different divisions as it is in TV production. It is clear there is a real desire within the company that they will achieve their goal of becoming the global number one across all sectors and doing so while still listening to their customers.
    Global domination starts here.
    It is true that on this trip to LG’s home country, we have been shown nothing within the TV product categories that we haven’t already seen at CES a number of times, or had in for review, such as the 84 inch 4K TV. There was no secret unveiling of a future UltraHD playback system, or some 40 inch OLEDs. Indeed, in terms of breaking news this trip was short by some margin. But I guess that entirely misses the point of why the UK’s premier tech websites and magazines were flown 5,500 miles to Seoul. LG wanted to show us that they don’t just manufacture TVs or mobile phones. That their chemical company is just as innovative as their mobile design division and they even have cutting edge smart technology in their fridge freezers. This was LG showing they are a real super power in all areas of technology, and whilst not forgetting their roots, demonstrating to the UK press here that they mean business. Once you realise the scale of the company and it’s resources for product development, you start to view the old Lucky Goldstar in a very different light. This is where the claims of wanting to sell more TVs in the £500 and above premium price range make sense.

    This is where the smart features in the latest washing machine mean just as much as the smart TV systems in the home entertainment products. This is why OLED is finally here at last. You also start to see why LG can compete on price and the level of technology in their products when you factor in that they rarely go elsewhere for components. LG Display manufacture all the panels for the CE TVs and mobile phones, as well as the displays used on the HA devices. Need a battery for a new mobile phone that is at the development stage? No problem. LG Chem will sort out the R&D and development for that product's battery. LG Display will give you the latest IPS unit for the phone screen. So, once you sort out the design in the LG mobile division and add all this together, you can see why gaining that number one ambition may not be far away.

    What drives this utter dedication to being the best? Well apart from the obvious points, there is another giant consumer electronics manufacturer who also have their headquarters in Seoul. This ‘other’ company are the current global number one and some would say the envy of every LG employee and executive. You see things are very different in Korea when it comes to employers and the loyalty of the staff. Compared to the UK where moving between employers in a given field is, well, almost a given. Not so here. It is the ultimate choice of the blue or red side of the city for graduates leaving school each year.

    In South Korea working for LG, Samsung, Kia or any of the number of major conglomerates, is a job for life. You don’t swap sides at half time and very few cross that divide. An LG employee going to work for Samsung is almost as unlikely as a Glaswegian supporting Celtic for half his life and then changing to Rangers for the remainder. It just doesn’t happen. Because of this all the major companies fight it out for the best talent leaving universities in any given year. We were told there are not enough skilled workers coming through the Korean system to satisfy demand. One executive informed our party that if any of us were software engineers looking for a challenge, then he had a well paid job waiting for us. The skills shortage in software engineering is a major problem for both Korean electronics firms and one they are desperate to solve.

    LG Display factory with full size football pitches for staff use

    The employees become incredibly proud of their responsibility and the company. They all work together, with a visible passion to achieve their goals. And the company looks after their employees incredibly well. Every facility we visited during our stay had sports facilities, gyms and pitches for use by the employees during their breaks or after their shifts. They also have fully equipped canteen areas as well as shopping centres under each complex. LG owns or sponsors sports teams and also runs a number of community schemes covering education and other opportunities. Company housing is also available to the staff at subsidised rates. It feels like one big family and this shines through when you see just how passionate the staff are for their employer and their products.

    Working for a Korean company was described as a life style choice. Samsung people don’t eat in the same restaurants as LG people when attending CES, for example. They both know their own haunts and they stick to them, never straying into the other's territory.

    There is a real sense of pride to which side of the fence you have chosen and as such there has been some fall out. Each facility has security procedures that would put most airports to shame. Every member of staff is scanned and x-rayed as they leave for home each day. Stealing technology and selling it to the opposing side does happen and there have been a number of well reported instances recently. The employees see the security checks as part of the daily routine, as a journalist the fact you can’t take pictures and have the lenses on cameras taped over before entering, feels very strange and frustratingly restrictive. But when you see what is at stake for LG when it comes to the development of new technology, you can understand what might look to outsiders as paranoia.
    Product Innovation.
    Aiming for innovation requires a large investment in time and money. Twenty percent of the total number of LG employees work in R&D departments, with 5 R&D facilities in Seoul alone. To be the best in any given market requires constant evolution of the technology used and this is where LG believe they can get ahead in the race. The various executives you speak to admit that not that long ago the company was more reactive than proactive. But things have certainly spun around the full 180 degrees. Money, staff and resources are being pushed hard to get results, to be the first to market with innovative new products and technology, and to set the pace for others to follow.

    Just the mention of a company like Apple developing a Smart TV for launch gets a wry smile from the LG executives as they state they are not overly concerned at the prospect. They explain that it is not a simple task developing a TV and then being able to fill it with useful Smart functionality. It is clear that LG mean business and won’t be distracted from their goal for market domination.

    In the UK they report that brand awareness is at a high, yet they want even more consumers to consider their products as luxury premium items. They are aiming to have a quarter of the over £500 TV space which they see as a big market opportunity, now that flat panel TV saturation is high within the UK. They see premium design, smart features and cinema 3D as major factors in developing the brand further. But it is not just R&D and features that have to shine through, the brand has to build its reputation on reliability as well. Going from reasonably obscure low budget manufacturer to mixing it with the big brands at the top of the market is no accident. LG will be the first to admit that to be the best they must evolve to interact and learn from their customers. Get this right and they expect to achieve their goal of top CE brand by 2015. They are already the strong number two in this respect.

    Brand awareness is an important key to getting there and LG sponsors a number of major sporting teams and venues. The LG arena in the UK is the second busiest live venue with major acts performing on an almost weekly basis. They also have a strong connection with F1 where the LG logo is in plain view throughout the circuits being raced. Plus they have a strong internet channel with blog sites and viral adverts playing on You Tube to millions of viewers.

    Products for 2013.
    Finally we get to the products in the 2013 roadmap. Premiumisation was the word printed in bold on the presentation slides for their 2013 TV line-up. The main player has to be OLED and at last it finally looks like the product will arrive as planned this year. After a couple of false starts due to manufacturing difficulties you can now pre-order your 55 inch model at Harrods. The actual units are projected to arrive with UK customers in Q2 and in South Korea, where the product has been shipping since January, they have sold 200. Now that might sound like a small number of sets, but when you factor in the cost of the first generation screens and the size of the home market, that result is quite reasonable.

    It is the cost of the technology that will restrict the take up for OLED at the start, but when pushed on the question during a Q&A of pricing reaching premium LED LCD levels, the confident reply from LG was, “Two to three years... depending on the competition”. Depending on the competition is quite telling. LG obviously know that they are not going to be the sole player in the OLED market and realise that they have to be competitive quickly. Rumours are rife that at least one Japanese company will bring their 4K 56 inch version to market as early as Q4 this year, but LG didn’t seem to be that concerned with the higher pixel density offerings that may appear. When asked if they are developing a 4K Ultra HD model, the reply of “We don’t know for sure at this moment in time”, was more subdued than confident. Perhaps mentioning they are working on such a model now may deter sales of the existing 1080p 55-inch OLED? We suspect that LG has a 4K OLED in their R&D labs as we speak.

    Curved OLED screens are a nice marketing angle to drum up column inches in the AV Press, but the concept is far from perfect. The use of curved screens in commercial cinemas and high-end home cinema is to help with uniform light hitting a large projection screen and balancing the side effects of an anamorphic lens on the projector. Such screens are used within a narrow field of view of the audience so there are no side effects reducing the viewing experience. This however doesn’t sit as well with a curved TV in a normal living room. There should be no issues with uniform light as it is not a projection system. However there will be issues if the screen is not viewed square on. Go off to the side and you will start to get side effects and may even miss portions of the picture depending how far off axis you get. Hardly ideal for the majority of living rooms. We get the concept from the marketing angle, which is how flexible OLED screens can be. In the business world where curved screens can be used as billboards for advertising we get it. But, in the home environment there is no need for curved screens. We don’t see this one being a reality for the home, although the LG representatives seemed to suggest the curved OLED will be available in late 2013. We wait to see.

    More likely than a 4K OLED in the short term, will be smaller screen sizes of the LED LCD Untra HD models. On our visit to the LG Display factory, next to the border with North Korea, we were told that adding the extra pixel density to existing LCD panels on the production line was far easier than completely retooling for OLED panels. With that in mind LG are not ruling out screen sizes of 40 inches and above for future UltraHD models, and prices will likely drop for the 55 and 65 inch models shown at CES. With Sony recently announcing their LED LCD 4K screens at around $4k (55inch) and $5k (65 inch), you can be sure that LG will compete here.

    They are also hoping the 100 inch Laser TV will make it to the UK market in 2013. It will depend on retailers taking the model on, but LG seemed confident that would happen. This was also the first time I had managed to see the picture quality in surroundings outside CES, and it is an impressive system for those who fancy a large screen without going the full projection route. The screen section is made up off many layers of light rejecting material and is a dark grey colour, almost black, when nothing is projected. This allows a bright image to be shown without strong ambient lights completely washing the image out. It’s not perfect, but it is mighty impressive and we hope we get the chance to test it soon.

    The main line-up of LED LCD screens for 2013 looks strong and they are packed full of smart technology. Design is also good with thin bezels and impressive backlight uniformity on the samples we were shown. Again, we hope to get these in soon for full testing as they begin to be released towards the end of this month. For Plasma fans, well, they are still making one for 2013, however it would appear that it only exists because the ‘other’ company still makes them. The design on this year's model looks a little bland, but picture quality was good in the strong showroom lighting. We will of course be seeking it out when available.

    The technology being added this year also aims to get pictures more accurate in terms of the industry standards. I can’t tell you how satisfying it is to sit in a presentation and hear the speaker talk about Rec.709 colour space, 3D colour mapping, white balance correction features and more. At last it feels like the continual pressure of not only our feedback, but others as well, has finally managed to get the engineers to look at, understand and aim to introduce the calibration technology and features that gives consumers even more accuracy out of the box. The real test will be when we measure the results, but in the mean time it is satisfying none the less to see CIE charts as part of a presentation (and used correctly too).

    In terms of TV the last nugget of information which was interesting to us here at AVForums is that LG may introduce 21:9 consumer TVs. They already have their PC monitor which looks stunning and works really well with multiple windows open on the screen. This design will also be popular with video editors giving them more real estate for timelines and viewers. Plus LG say that a 34 inch version is coming soon. When pushed about a larger sized consumer TV version the reply was that they are watching the market place closely and may release something in this sector in the coming months. When asked about the viability of a 21:9 ratio TV, given that 90% of the material will be 16:9 TV programs and only 2.40:1 Blu-rays and DVDs would fit, plus the scaling involved to get this to work, again the answer was a cautious, "...we will monitor the situation".
    And there’s more...
    Like most of the trip we didn’t focus on one area of the LG business, so TV was only one and a half days of the three day trip. We also explored the work of Home Appliances, an area where LG claim they are seen as a premium brand in the UK.

    We were given a demonstration of the direct drive washing machine with its multiple cycles of spin and energy saving smart features. What was also interesting was just how quiet the drive system is when in operation. Because the washing machines use the direct drive system there is no belt in use, thus reducing vibrations through the shell of the machine.

    Also shown were concepts of fridge freezers where you can see when you are low on supplies and order more from the touch screen on the door. This year's designs also feature doors within doors for more storage of frequently used items to the front and less used towards the back, saving you rummaging through items in the fridge to find what you want.

    We also saw robot hoovers and were told about a washing machine that can wash your clothes without using any water! Sadly LG wouldn't divulge exactly how this will work or if it's a truly waterless system, but it did catch our interest and we will be looking out for the finished article to see just how it works.
    Parting thoughts.
    In rounding up my visit to the various companies within LG and seeing the innovation and dedicated teams hard at work on future technologies, I come away more impressed with the South Korean giant than when I arrived.

    The sheer scale of operations, the various companies all working towards innovating over many different areas of consumer electronics and the dedication to listening to what the customer wants is impressive. LG are at the cutting edge of new technology and they are investing huge amounts of R&D and expertise to make sure their products are leading the way in the marketplace. They are not satisfied with being a solid number two and they may very well hit their target of being number one by 2015. The fact that they have developed and brought to market OLED TV ahead of everyone else is impressive and we hope that they master the manufacturing process quickly to bring prices down to affordable levels as they predict. Their Home Entertainment line-up for 2013 looks impressive and the same message of smart and easy to use products also applies to home appliances, mobile phones and every other part of the LG business. They also fully admit that the current markets are tough places to compete in and they believe that to be the best they have to learn fast and take the consumers wishes seriously. And just on the horizon are the Chinese companies ready to jump on the coat tails and make their own dash for the top. They have their work cut out that's for sure.

    2013 is shaping up to be a fantastic year of innovation and break-through products throughout the market and it would appear from what I have seen on my visit, that LG are right there at the heart of it and ready to make the push to the top. We are looking forward to finally getting our hands on their products and putting their claims to the test.

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