South Korea’s electronics giant LG Electronics Inc. is likely to see this year’s operating profit from home appliance and air solution (H&A) division exceed 1 trillion won ($850 million) for the first time on brisk sales of its premium-end products.

According to industry sources on Monday, LG Electronics’ home appliance business is expected to rake in 1.2 trillion won in operating profit in 2016, a fresh high after recording 981.7 billion won last year.

The home appliance unit’s operating profit for the first quarter this year surged 77.7 percent on year to 407.8 billion won on sales of 4.21 trillion won. Its operating profit margin reached 9.6 percent, unusually high in the consumer electronics industry with a margin generally below 5 percent. In this market, even a 1-2 percent operating profit margin is deemed lucrative.

The company’s stellar performance is mainly driven by robust sales of its high-end electronics, say industry observers. Thanks to popularity of LG Twin Wash, a washing machine that pairs a regular front-loader with a second mini-washer built into the pedestal below, LG brand now commands the largest 34.2 percent share in the market for premium washing machines whose average selling price is at $900 or higher.

The company’s luxury built-in kitchen appliances are gaining popularity worldwide as well. The company first released the so-called LG Studio built-in kitchen appliances designed in partnership with America’s famous interior designer Nate Berkus in the U.S. market in 2013. The package comprising a microwave oven, a cooktop, a refrigerator, a dishwasher and a wall oven costs more than $20,000, but its sales have been doubling every year since its launch. Propelled by its success, LG Electronics rolled out the Signature Kitchen Suite, a pricier built-in kitchen appliance line-up, last year.

The competitiveness of LG’s consumer electronics lies in its motor technology, note industry observers. Its Direct Drive (DD) motor, used in washing machines, has been given a 22-year-life certification by the Association for Electrical, Electronic and Information Technologies (VDE or Verband der Elektrotechnik Elektronik Informationstechnik), one of the biggest and most respected technical associations in Europe. It also gave LG Electronics’ Inverter Linear compressor employed in its refrigerators 20-year-life certification.

This strong technical prowess is what has kept the Korean consumer electronics giant’s lead in the global market, helping it ward off the Chinese rivals’ relentless challenges. China’s appliance maker Haier Group acquired General Electronic Co.’s (GE) appliance unit and Midea Group bought a majority stake in Toshiba Corp.’s home appliance business this year.

“A third of our consumer electronics is produced at the plant in Changwon, South Gyeongsang Province (in Korea),” an unnamed official at the company, adding that despite high production costs, the company has successfully maintained high profitability.

By Lee Seung-hoon

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