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Sunday, Dec 07, 2003

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LG to make China factory global hub for appliances

Nina Varghese

Tianjin (China) , Dec. 6

LG Electronics plans to make its factory in this port city, 137 km south-east of Beijing, its global hub for producing microwaves and air-conditioners.

It plans to replace even its South Korean base to this low-cost manufacturing unit by increasing the production capacity by 2005. The production cost here is about 20 per cent lower than the Korean base..

Besides manufacturing its own brand, this unit also produces original equipment for well know brands.

According to Mr Chee Kew-Chul, Executive Vice-President, LG Electronics Tianjin Appliances Co Ltd, the company planned to cut cost for supply and storage "by applying the best practices in the industry".

This plant makes air-conditioners, microwaves, vacuum cleaners, rotary compressors, magnetic tubes, motors for air-conditioners, AC compressors and washing machine. LG Electronic plans to increase production capacity by 2005.

The mid- and long-term view of the company was to enter the top-end of the Chinese market, which is estimated to be the biggest home appliance market in the world. By 2005, LG Electronics plans to expand the land area at its Tianjin factory to eight lakh sq. m with the factory occupying six lakh sq. m.

Almost 80 per cent of the company's production was exported and 55 per cent of this was to the US, Mr Chee said. When asked if restrictions by the US would affect the company, he said they would have to wait and watch. He, however, admitted that the withdrawal of the 4 per cent concession by the Chinese Government would affect profitability.

The LG Electronics plant at Tianjin is an 80:20 joint venture between LG Electronics and Tianjin Municipality. The paid-up capital is $123 million and the total investment is in the region of $284 million.

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