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LG More Profitable Than Samsung in Consumer Electronics

February 1, 2016 - Written By Dominik Bosnjak

LG Electronics seems to be on a slight long-term decline in terms of annual sales – after 56.51 trillion of South Korean won earned in 2010, the company “only” managed to achieve 55.75 trillion last year which amounts to around $48 Billion. In comparison to that, Samsung Electronics grew immensely during the same period, boasting 200.65 trillion ($172 billion) in 2015 in comparison to 154.63 trillion half a decade ago, or almost 30% more. The South Korean tech giant achieved these impressive numbers thanks to its generally well-performing semiconductor and smartphone operations, the latter of which has been leading global shipments charts for years. At the same time, LG was not exactly lighting the mobile phone market on fire but wasn’t doing too badly either, as it was recently revealed that its mobile division still managed to achieve some growth in 2015.

Regardless of that, latest reports from Seoul indicate that LG is outperforming Samsung in all aspects of Consumer Electronics. More specifically, in the Home Entertainment (HE) and Home Appliance & Air Solution (H&A) divisions of LG are outperforming their Samsung counterparts both in terms of scope and sheer profitability. The two divisions combined have earned close to 33.9203 trillion won in annual sales, 1.0388 trillion won of which were operating profits so their 2015 profit-to-sales ratio amounted to 3.1%. At the same time, Samsung Consumer Electronics division reported 46.9 trillion in revenue with a 2.7% profit margin or 1.25 trillion won in profits. In other words, LG Electronics is making more money on their investments, i.e. products than Samsung Electronics, and that has been the case since 2014. On its own, the LG H&A Division managed even more impressive numbers, as it reported a 5.9% profit margin in 2015 and consequently raised its operating profits to a new record of about 1 trillion won, or $850 million. The division’s sales revenue exceeded 16 trillion, thus also surpassing its Samsung counterpart by an amount between 1.5 and 2.5 trillion.

While none of this is directly relevant to the smartphone market, it’s always interesting to gain some perspective on how “little” huge brands like Samsung and LG proportionally earn on their products. True, recent reports revealed that their smartphone businesses have been a little more profitable in 2015, but not by much, not to mention the fact that profit margins in the mobile phone market have been on an almost universal decline for some time now. Whether that will shape the general consumer electronics strategy of these South Korean tech giants and their competitors and to what degree remains to be seen.