LG plans green makeover in Indian facility

South Korean giant LG Electronics is working on using technology to revamp its product line by next year, based on three key parameters.

The new products will offer reduction in energy utilisation by 22-30 per cent, offer smart gadgets such as internet-enabled TV and leverage the health platform, such as refrigerators to help you burn calories or TV sets which will help you control your weight.

It has also put in an ambitious target to reduce the cost of producing all these products by at least 10 per cent, including components.  

These products, to provide LG a "new face", are to be launched next year and will be developed by the company's  research and development (R&D) wing in India, which is being transformed into a global hub. Says Moon B Shin, managing director of LG in India: "We are going to give a new face to our products, based on (these) three new planks. These are being developed. Also, to reduce costs by 10 per cent so that we can pass on the benefit to customers or have a leverage if raw material costs go up."

Under the plan, cleared in Korea recently, the Indian R&D centre will be upgraded to design and develop televisions, refrigerators, washing machines and microwaves for the world. It will hire 2,000 more engineers to upgrade the operation. Currently, the 3,000-strong R&D centre mostly undertakes localisation of products from Korea.

The company is setting up a third factory near Chennai, with an investment of Rs 1,500 crore. Till date, LG has invested Rs 1,300 crore in India. The aim is to transform India into a manufacturing hub, from where 30 per cent of the revenues by 2015 will come from exports. Currently, it is around 12 per cent. The markets which India will cater include South Africa, West Asia and even South Korea. 

Adds Shin: "India's contribution to global LG revenues will go up from six per cent currently to 12 per cent by 2015. This means we will overtake Korea and become number two after the US in revenue contribution."

Their labour costs in China are eight per cent lower than in India. "China has economies of scale, which India still does not have. However, with the expansion, this gap will reduce," said Shin.

He stressed the other decision, to make India a key R&D centre. "The Indian R&D centre will develop global platforms for products and we will be leveraging the lower cost of skilled talent in the country."

LG India, said Shin, is targeting exports of Rs 2,000 crore this year. The company will expand its manufacturing capacity of TV sets from a million to three million sets annually and of refrigerators from 3.5 million to five million. "We are already reaching 100 per cent utilisation in our capacity and are expecting to grow by 30 per cent annually. So, we will need more investments," he said.