LG Pushes for Major Localization in China

LG Group is set to expand its business base in China, hiring Chinese managers and heavily investing in local facilities.

The company said on Dec. 1 that it has decided to expand research and development (R&D) and production facilities in China next year, a move aimed at securing a stronghold in China by 2005 in line with the country’s market liberalization plan. China joined the World Trade Organization earlier this year.

Under the plan, LG targets sales revenue of $4 billion this year, $5.5 billion next year and $8 billion in 2005. It is also set to increase the number of local R&D workforce from 700 this year to more than 1,000 next year and to some 2,000 in 2005. It also plans to replace three of its seven local branch heads with Chinese managers.

LG Chemicals will establish direct sales channels centering on `LG Chemical Trading Corp.` opened recently in Shanghai, focusing on high value-added products. To this end, it plans to build a manufacturing facility for plastic engineering in Guangdeung, which will roll out 20,000 tonnes of plastic beginning the second half of next year.

`LG Dagu,` a PVC factory in Tenjin that rolled out 240,000 tonnes of PVC last year, and `LG Yongshing,` which produces 150,000 tones of ABS in Ningbo, will boost their capacities to 640,000 and 500,000 respectively by 2005.

Then, the company explained, sales in China estimated at some $800 million this year will likely reach $4.6 billion in 2010, which almost equals LG Chemical’s total sales revenue last year.

In addition, LG Philips LCD is set to launch in the first half of next year a full operation of its LCD module assembly plant recently opened in Najing, and LG Industry plans to build one regional headquarters, five local businesses, three branches, one research lab and six technology support centers through 2006.

After establishing a local business in Huijeu back in 1993 ahead of its rivals at home, LG opened a holding company in China in 1996. It is currently running 36 local firms including 23 production facilities, hiring some 25,000 Chinese workers.

Keuk-In Bae bae2150@donga.com