LG’s Koo to Weigh AI Execution, Profit Recovery in Year-End Reshuffle

[Korea Financial Times, Gwak Horyung] LG Group is expected to carry out its regular executive reshuffle for 2027 in late November.

Having replaced the CEOs of major affiliates, including LG Electronics and LG Chem, in a sweeping overhaul last year, the group is expected to emphasize management stability this year. It may still make selective changes based on business performance.

The main criteria are expected to be execution in artificial intelligence (AI), which LG Group Chairman Koo Kwang-mo has picked as a future growth engine, and whether profitability improves in existing businesses.
According to the business community on Oct. 25, LG Group began business review meetings for each affiliate on Oct. 19, chaired by Chairman Koo.

The reviews, scheduled to run for about a month, will start with electronics affiliates such as LG Electronics, LG Display and LG Innotek. They will be followed by chemical affiliates such as LG Energy Solution and LG Chem, and then telecommunications and service affiliates such as LG Uplus and LG CNS. After reviewing each affiliate’s business results and strategy, Chairman Koo plans to reflect them in the year-end reshuffle.

Last year, LG Group replaced the CEOs of major affiliates, including LG Electronics, LG Chem and LG H&H, to refresh its management.

CEOs have changed at seven of eight major affiliates over the past three years, all except LG CNS. A selective reshuffle tied to business results and management tasks is therefore more likely this year than a large-scale replacement.

AI Business to Split CEO Assessments

Execution in the AI business is cited as the main variable in this year’s reshuffle.
Since the start of this year, Chairman Koo has personally led global cooperation to expand the AI business. He has met in succession with Big Tech executives such as Nvidia CEO Jensen Huang and Microsoft CEO Satya Nadella, discussing cooperation in AI data centers (AIDC), enterprise AI transformation (AX) and physical AI.

At a meeting of affiliate presidents in September, Koo stressed that “AI is no longer an option but a core pillar that determines future competitiveness.” He urged executives to “bring speed and relentless execution so that we can win in the decisive arena of the AI future.”

Among the CEOs of AI-related affiliates, the performance of LG Electronics President Lyu Jae-cheol, LG Innotek President Moon Hyuk-soo and LG CNS President Hyun Shin-kyun is drawing attention.

Lyu became CEO this year, so he must manage profitability in existing businesses while delivering concrete results in new growth areas.

LG Electronics is expanding its chiller business, which supplies cooling solutions for AI data centers. It is also working to reach ahead of schedule its revenue target of KRW 1 trillion for the segment, originally set for next year. The company is widening its scope to coolant distribution units (CDUs) and robots, and is focused on turning growth in chillers into higher revenue from follow-on products and new businesses.

Moon was promoted to president in 2023 and to CEO last year. His key task is to broaden the business portfolio into semiconductor substrates and automotive sensing while maintaining the competitiveness of the core smartphone camera module business.

In the first half, the optical solutions business again accounted for more than 80% of total revenue, leaving the company heavily dependent on major customers such as Apple. LG Innotek aims to diversify a revenue structure concentrated in its main business by expanding its FC-BGA (flip-chip ball grid array) and autonomous-driving-related parts businesses.

Hyun must continue to expand the scale of LG CNS’s AI and cloud business. The company’s AI and cloud revenue in the first half was KRW 1.6714 trillion, about 59% of total revenue.

LG CNS is pursuing a strategy of supporting the AI transformation (AX) of group affiliates’ operations while expanding its AI business to external clients. The key to growth is converting capabilities built on internal group demand into orders and revenue from outside customers.

Earnings Recovery, Business Restructuring Key

In chemicals and batteries, restoring profitability in core businesses and shifting the business structure are expected to be the main variables in assessments.

LG Chem President Kim Dong-chun must pursue a recovery in petrochemical profitability and a shift in business structure at the same time. The petrochemical division posted better-than-expected results in the first half of this year. The recovery is slowing in the second half, however, and demand uncertainty persists.

The company is also working to raise the share of growth businesses such as advanced materials. Turning a short-term cyclical upturn into a profitability recovery, while shifting the business structure toward advanced materials, remains a management task.

LG Energy Solution President Kim Dong-myung is focused on expanding the energy storage system (ESS) business and improving production efficiency in response to slowing growth in the electric vehicle market. Third-quarter operating profit came to KRW 601.3 billion, but the figure includes the effect of the Advanced Manufacturing Production Credit (AMPC) under the U.S. Inflation Reduction Act (IRA). While expanding ESS, the company must also build an earnings base of its own that excludes the tax credit.

LG Display President Jeong Cheol-dong led an earnings improvement through cost efficiency and a restructuring centered on organic light-emitting diodes (OLED). Under Jeong, who was brought in as a troubleshooter in late 2023, LG Display posted first-half revenue of KRW 11.1461 trillion and operating profit of KRW 39 billion this year. It was the company’s first first-half profit since 2021.

The company recorded an operating loss in the second quarter due to one-off costs and other factors. It still returned to profit on a first-half basis, showing a recovery in profitability. With the OLED-centered business structure and cost improvements reflected in earnings, its next task is to sustain the profit trend.

External Talent, Vice Chairmen’s Lineup as Variables

The performance of CEOs recruited from outside the group is also one axis of the assessments. LG H&H President Lee Sun-joo, an external CEO, is expanding in the North American market and strengthening brand competitiveness.

Lee previously served as a vice president at L’Oréal Korea and as CEO of Terarosa, among other posts. LG H&H’s second-quarter North American revenue was KRW 205.8 billion, up 47.3% from a year earlier, surpassing China revenue for the first time. The company is expanding local distribution networks such as Costco, Sephora, Ulta, Amazon and TikTok, centered on its own brands including Dr.Groot, CNP and belif.

The sale of the Avon business is also part of the portfolio restructuring. Rather than relying on acquired brands and its existing distribution base, the company is focusing on transforming its North American business around its own brands, whose growth potential has been confirmed.

LG Uplus President Hong Bum-sik is also an external talent recruited personally by Chairman Koo. A former CEO of Bain & Company Korea, Hong is maintaining the competitiveness of the core telecom business while pushing to commercialize AI services. His key task is to protect the telecom business’s stable earnings base while establishing AI as a new growth engine.

Within the group’s management, the role of LG Corp. Vice Chairman Kwon Bong-seok and the vice chairmen’s lineup are also of interest. The vice chairmen’s group numbered six when Chairman Koo took office. It shrank to a one-man setup under Kwon last year after Shin Hak-cheol, former LG Chem vice chairman, stepped down.

Kwon assists Koo by overseeing group strategy and business adjustment. Successive CEO changes at major affiliates have largely settled the management lineup, so the current setup is expected to be maintained this year. However, a change in the vice chairmen’s composition cannot be ruled out if the need to strengthen group-level strategy coordination grows.

Gwak Horyung (horr@fntimes.com)