LG to foster smart factory business as new B2B growth drive

PYEONGTAEK, Gyeonggi Province -- LG Electronics Inc., the leading global home appliance maker, aims to foster its smart factory business as a new growth engine generating billions of dollars in sales by 2030.

The South Korean tech giant said on Thursday it is developing its in-house smart factory solutions, originally provided to its affiliates, into a business-to-business (B2B) service with accumulated know-how from the operations of more than 60 factories worldwide for the goal.

LG Electronics, the flagship unit of South Korea’s fourth-largest conglomerate LG Group, launched the smart factory business with some 70 staff earlier this year to meet the growing demand for plants applied with artificial intelligence and digital transformation (DX) amid rising labor costs and shrinking populations.

“We have won deals (from external customers) worth about 200 billion won ($144.6 million) in the first six months,” said Song Shi-yong, head of LG Electronics’ smart factory business division. “Demand for smart factories is flooding, especially from companies building new plants in North America.”

LG Electronics aims to develop the smart factory division as one of its core B2B businesses as the global market is growing by 10% every year. The company set a goal of generating more than 40% of its sales from B2B businesses by 2030.

The world’s smart factory industry was forecast to rise 89% to $268.5 billion by 2030 from $155.6 billion last year, according to market research firm Precedence Research.

THE ONLY TOTAL SMART FACTORY SOLUTION PROVIDER IN KOREA

LG PRI, which has been working to improve the manufacturing competitiveness of the group’s affiliates, handles the smart factory business.

The unit secured more than 1,000 patents based on the 770 terabytes of data accumulated on production from the group’s know-how on factory design, construction and operation in 66 years.

“Except for LG, few domestic companies are providing total solutions for the entire manufacturing processes including factory planning, design, construction and operation,” Song said.

Its major clients include secondary battery makers, auto parts producers and logistics service operators.

The company aims to expand its customer bases into the semiconductor, bio, as well as food and beverage sectors.

CUTTING-EDGE TECHNOLOGY

LG Electronics showcased its smart factory solution technology through a scale model equipped with AI and high-tech robots of a real plant at the LG Digital Park in Pyeongtaek, about 60 kilometers (37 miles) south of Seoul.

AI filtered out defective products in real-time and monitored workers’ safety, while robots handled the almost whole manufacturing process from tightening screws to transporting the finished products.

LG Electronics’ smart factory technology was recognized by the world. The World Economic Forum (WEF) selected two of its plants -- one in Changwon, South Gyeongsang Province, and the other in  Clarksville, Tennessee – as lighthouse factories.

The WEF named only 153 plants worldwide as lighthouse factories, facilities powered by Fourth Industrial Revolution technologies, such as the Internet of Things, big data, AI and robots.

LG Electronics’ smart factory solutions focus on reducing any delays and errors.

A refrigerator production line at the Changwon plant manufactures a unit in 13 seconds, for example. A 10-minute delay will interrupt the production of nearly 50 refrigerators, resulting in a loss of some 100 million won with the assumption that a fridge is sold at 2 million won.

“The introduction of smart factory solutions at the Changwon plant raised its productivity by 17% and energy efficiency by 30%,” said an LG Electronics official, adding quality costs stemming from defects fell 70%.

Write to Eui-Myung Park at uimyung@hankyung.com
 
Jongwoo Cheon edited this article.