Top

Insights Tag: Climate Change

Climate Change Concerns Aid LG Electronics’ Q1 Numbers

  • The revenue for Q1 2023 stood at KRW 16.26 trillion, a 5.7% YoY decline.
  • The operating profit of the company declined by 15% YoY.
  • The revenue from the vehicle solutions segment grew 27% YoY to reach KRW 2.4 trillion.

LG Electronics has generated relatively steady Q1 2023 earnings results thanks to the stabilization of material costs and the continued sales of high-end home appliances. The heat pumps and energy storage devices helped it earn more as the climate change restrictions tightened.

The company’s revenue declined 5.7% YoY in Q1 2023 to KRW 16.26 trillion ($12.75 billion), while the operating profit declined 15% YoY to KRW 1.36 trillion ($1.06 billion) owing to sluggish global demand. Although the profit dropped YoY, it was a considerable improvement over the losses in the previous quarter.

The business portfolio is experiencing growth through qualitative measures, particularly in expanding B2B segments such as vehicle components and system air conditioners. Besides, non-hardware business revenue continues to increase. The vehicle component solutions segment raked in high profits, contributing almost 15% to the total revenue, up from 11% in Q1 2022.

LG Electronics Revenue by segment, Q1 2022 - Q1 2023

Financial highlights

  • The consumer electronics segment’s revenue fell 5.5% YoY to reach KRW 11.38 trillion ($8.9 billion). However, the operating profit increased by 92% owing to lower logistics costs, efficient management of raw material supply, improved spending efficiency and active measures to enhance cost structure. The contribution of this segment to LG’s Q1 operating profit rose to 89.7% from 40% in Q1 2022.
  • The revenue of the vehicle solutions segment grew 27.1% YoY to reach KRW 2.39 trillion ($1.87 billion) driven by high order backlogs and the electric vehicle (EV) boom in the automotive market. Supply chain management improvements for key components, like semiconductors, played a crucial role. The operating profit grew to KRW 54 billion ($42.3 million), compared to the loss of KRW 6.7 billion ($5.6 million) in Q1 2022. Although the segment contributed just 4% to LG’s Q1 operating profit, it is touted as the future growth driver.
  • Revenue from other businesses, which include business solutions, kept declining YoY to reach KRW5 trillion ($1.95 billion), falling 25%. The operating profit dropped 91% YoY to KRW 85 billion ($66.7 million). The segment’s contribution to LG’s Q1 operating profit was only 6.3% compared to 61% in Q1 2022.
  • LG Innotek’s revenue grew 10.7% YoY to KRW 4.4 trillion ($3.43 billion). The operating profit decreased by 60.4% to KRW 145 billion ($114 million). This brought LG’s consolidated revenue to KRW 20.4 trillion ($16.01 billion).

Market outlook

Amid declining consumption due to economic downturn concerns, consumer electronics revenue is expected to fall while profits will remain sluggish in the next quarter. The decreasing IT demand will also have negative impacts on yields. The huge order backlog (KRW 80 trillion) and the ongoing transition to EVs will drive the vehicle solutions segment revenue. Based on the high growth within EV markets, it is expected that the EV component business will continue to take up a larger share in the future. A reliable portfolio of in-car infotainment systems, e-powertrain, headlights and unique solutions will maintain LG’s competitive advantage.

LG Electronics is going aggressive on increasing its technological advantage over competitors. This year, the company plans to invest over KRW 5 trillion ($4 billion) in its most significant capital expenditure in 10 years, mainly in the automotive electronics business. This move aligns with the business strategy of focusing on long-term growth and prosperity. The R&D spending has also been increased by 10% this year. LG wants to sustain growth and ensure consistent profitability by proactively and adaptively addressing shifts in demand across various regions and segments. It also aims to expand eco-friendly enterprises in pursuit of revenue growth through energy-efficient and environment-friendly products.

*LG Innotek’s numbers are not included in the total revenue and have been mentioned separately.

Related reports

 

Top 10 Macro Risks For Tech World in 2023

  • Counterpoint analysts say economic recession will be the biggest macro risk affecting the tech world in 2023.
  • Economic recession is followed by the ‘US vs China rivalry’ and ‘energy crisis’ risks.
  • There is a sense that the tech industry is at the whim of factors it cannot control, as most of the issues do not relate to tech itself.
  • China-related issues feature prominently on the ranking, appearing three times.

 London, Boston, Toronto, New Delhi, Hong Kong, Beijing, Taipei, Seoul – January 24, 2023

Counterpoint Research has released its latest list and analyses of the top 10 macro risks that are most likely to impact the tech industry in 2023. In the list, which is a result of a survey conducted among Counterpoint analysts, the potential of economic recession ranks as the highest, by a large margin, followed by ongoing US and China tensions, and the energy crisis, which mainly stemmed from the Russia-Ukraine war.

Average Score of Top 10 Risks Rated by Counterpoint Analysts

average score of top 10 risks rated by counterpoint analysts

The risk of economic recession continues to impact almost all industries, and tech has not been spared, despite the post-pandemic boom. The concerns about recession driving other macro risks resonate throughout our analysts’ primary concerns, such as in expected emerging markets’ pain, tech earnings retreat, and China’s recovery path. As we wrap up the report, there is a sense that the worst of the economic headwinds in the developed world may have passed, but there are still question marks over how much of the damage has already been inflicted, or how fast the economic rebound will be in the coming year.

In 2022, we also saw an escalation of tensions in the United States vs China rivalry. Most prominently, sanctions by US authorities against China’s fledging semiconductor industry are likely to hold back growth in this strategically important sector, with deep and long-lasting ramifications in China and beyond. Elsewhere, the two countries still hold many grudges, the most significant being the status of Taiwan, stance over the war in Ukraine, and trade tensions. Any of these have the potential to plunge the countries into deeper conflicts, but from our point of view, the fragmentation of the global system into potentially ‘two standards’ is the most serious threat for the tech industry, as innovation will slow while costs go up.

Inflation reached the highest levels in decades in the West in 2022. One of the key drivers of this inflation was, and remains, the energy crisis. The cost of energy spiked in 2022 as a consequence of Russia’s invasion of Ukraine, especially for European nations, as well as those in emerging markets. As we foresee no conclusive end to the war, energy will continue to be an unstable platform for the global economy in 2023, particularly as a large increase in energy demand is expected due to China’s reopening. There are positive signals on the renewable energy front, such as the EU and US passing landmark clean energy packages that are expected to increase investments and reduce emissions much more quickly than initially anticipated. But still, the world is many years and perhaps decades away from stopping its reliance on hydrocarbons as the main source of energy.

BONUS PODCAST: Key Macro Risks For Tech Industry in 2023

Here is a snapshot of the rest of the top 10 risks:

  1. Emerging markets pain: The post-pandemic boom is absent in emerging markets, resulting in a notable drop in living standards. A strong US dollar, lack of inward investments, deteriorating fiscal and monetary positions, and continued volatility in energy and food supplies will hamper emerging markets’ growth potential.
  2. Tech earnings retreat: Big Tech hired too many workers and took on too many poorly thought-out projects. Now, the withdrawal of ‘easy’ money is harshly exposing the less robust companies. Sectors exposed to geopolitical tensions, regulatory scrutiny, and business models accused of brewing social ills will be most under pressure.
  3. China’s disorganized withdrawal from COVID-Zero: A sudden withdrawal from COVID-Zero has taken most of the population by surprise, leading to a massive infection wave and excessive deaths. An economic rebound is expected in 2023 with the release of pent-up demand, but the healthcare damage could linger on in the economy and society.
  4. China’s long-term economic stagnation: China saw three ‘lost’ years during the pandemic when economic growth was put on the back burner. It will be a test to see if the country can rediscover its economic growth mojo, while tackling a range of structural issues including population decline, high debt levels and a fracturing real estate sector.
  5. Cybersecurity: The pandemic and the war in Ukraine ushered in a period of persistent and high-profile cyberattacks, which will continue to pose grave risks to businesses and institutions in the coming years. There is a sense that defenders struggle to catch up with the attackers, who are richly resourced and operate nimbly, with some backed by malevolent state actors.
  6. Supply chain ‘reshoring’ not living up to expectations: Talk of building a domestic and ‘resilient’ supply chain continues to gain traction, but the global recessionary environment, the nature of economic principles, and logistical realities pose daunting challenges for those looking to move established supply chains home.
  7. Climate change: 2022 was the warmest year on record. Extreme weather caused significant human life and economic losses. Some progress has been made by the world’s most important actors, but it falls short of key climate goals. Companies are starting to modify their business practices to take a more responsible stance toward the environment, but sometimes this appears to be more of a marketing spin than real action.

Despite our gloomy tone, we would emphasize that the reason why negative shocks hit the tech industry hard in 2022 was that many were unprepared for the extent and concentration of the risks. In 2023, many of the risks we identified will become well known, and the nimblest companies will institute mitigating mechanisms to navigate the uncertain near-term future. Nevertheless, it is critical for all industry participants to be wary of potential risks and plan for potential opportunities, instead of being overwhelmed by short-term adversity.

Counterpoint subscribers can access the full report here.

We welcome questions, feedback and discussion with clients over the risks we set out here as well as the ones that didn’t make the cut.

Counterpoint Research’s market-leading Market Monitor, Market Pulse and Model Sales services for mobile handsets are available for subscribing clients.

Feel free to contact us at press@counterpointresearch.com for questions regarding our in-depth research and insights.

You can also visit our Data Section (updated quarterly) to view the smartphone market share for World, USA, China and India.

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Analyst Contacts

Yang Wang

 

Follow Counterpoint Research
  

Fighting Climate Change: Tech Tonic for Tectonic Shift

The Intergovernmental Panel on Climate Change (IPCC) recently released its most comprehensive and concerning report to date. Climate scientists have been reticent to ascribe too much weight to single weather events, but the IPCC report marks a shift. It brings the recent heatwaves in North-Western North America, flooding in Europe and China, and ongoing droughts and wildfires in many parts of the world into sharper focus while sharpening the language ascribing these events to human activity. It says many of these events would be almost impossible without humanity’s effect on the climate.

The report is timely – coming shortly before the COP26 summit in Glasgow, UK, which is due to take place in November. COP26 is the point at which government representatives will come together to thrash out the wording of agreements that have been in discussion for many months.

The last 18 months, during which the world has battled COVID-19, have highlighted that much of what we previously took for granted, such as office working and long commutes, face-to-face meetings, frequent international travel and large trade shows, can be largely dispensed with thanks to the power of technology. While some of us may miss travelling across eight time zones to visit clients, colleagues and partners, COVID-19 has shown us that these things are not strictly necessary. And while some of the changes in working style may revert to pre-pandemic ways in the months to come, it is likely that more people than ever will work from home at least some of the time; hybrid working will become the norm for many (assuming their roles allow them to).

But the positive impacts on sustainability through COVID-enforced changes in working practices are a by-product of the pandemic. So, what more can the tech sector deliver if it specifically targets fighting climate change?

The answer is a lot. But it needs a long-term, concerted effort by companies of all types, to take responsibility in ways, both large and small, to tackling humanity’s greatest existential threat. Let us consider a few of the ways:

  • Smart agriculture: One of the downsides of modern farming techniques that focus on large-scale, single-crop fields that require massive inputs of artificial fertilizer, herbicides and pesticides, is that soil health suffers. Healthy soil is a rich ecosystem that is able to store carbon as well as support a massive abundance of microorganisms. However, most soil on modern farms is almost devoid of life and can do little to store carbon. The advent of small farm robots that have developed significantly in the last few years, can help in multiple ways. They can work almost on a single plant scale, like targeting only those weeds injurious to the crops’ health. This is likely to be a slow fix though. Despite the steady improvements in the technology, it is only just at farm-scale trials. And ‘Big Agri’ business has a massive vested interest in farmers continuing to buy tons of fossil fuel-based fertilizers and other costly inputs. Undoing the damage done by industrial farming will take decades, even if there is consensus that it is the right thing to do.
  • Supporting reuse and recycling of smartphones and other devices: Counterpoint has been tracking the refurbished smartphone market for years. During this time, we have seen the refurb sector grow and develop substantially. But still only a small fraction of devices enjoy a second life. The energy and resource costs to build a smartphone are considerable. Phones collectively require substantial volumes of minerals and energy-intensive manufacturing processes. One way to measure impact is embodied energy. Estimates vary, but to manufacture all the smartphones that are likely to be consumed in 2021 will require approximately 375 Giga Joules of primary energy. Assuming a product life of 2.2 years, that represents more than 160 GJ per year. For comparison, cars require massively more primary energy to make, around 100GJ per car. But since cars have a much longer life, their annualized primary energy cost is only 4.6x that of a smartphone, despite weighing something like 7500x more than a typical smartphone. Cars, of course, consume massively more energy in use during their lifetime than smartphones, but for this comparison we are only concerned with the energy cost of initial manufacturing. In the same way that buying a second hand internal combustion engine car has less environmental cost than buying a brand new electric car, buying a second hand or refurbished smartphone has less environmental cost than buying a new one. For those smartphone makers that have embraced recovery, refurbishment and recycling of second hand devices, not only are they making a positive contribution to building their user base, they are also helping the environment by substantially reducing the embedded energy cost per year, per smartphone.

And humanity is likely to need every marginal gain available to achieve even the minimum targets to avert the worst impacts of the climate crisis.

We will always be happy to talk to our clients and other companies about ways they can mitigate their impact on the earth’s resources.

Related Posts

  1. Can Small Robots Revolutionize Food Production?
  2. Global Refurbished Smartphone Market Volumes Grew 4% in 2020; Higher Growth Expected in 2021
  3. Humanoid Robots – Are They Ready to Walk with Us?
  4. Podcast: Understanding the Opportunities & Trends in Global Refurbished Smartphone Market

Coverage

Insights

Social media

Contact us

Copyright ⓒ Counterpoint Technology Market Research | All rights reserved

Term of Use and Privacy Policy

Counterpoint Technology Market Research Limited

Registration

In order to access Counterpoint Technology Market Research Limited (Company or We hereafter) Web sites, you may be asked to complete a registration form. You are required to provide contact information which is used to enhance the user experience and determine whether you are a paid subscriber or not.
Personal Information When you register on we ask you for personal information. We use this information to provide you with the best advice and highest-quality service as well as with offers that we think are relevant to you. We may also contact you regarding a Web site problem or other customer service-related issues. We do not sell, share or rent personal information about you collected on Company Web sites.

How to unsubscribe and Termination

You may request to terminate your account or unsubscribe to any email subscriptions or mailing lists at any time. In accessing and using this Website, User agrees to comply with all applicable laws and agrees not to take any action that would compromise the security or viability of this Website. The Company may terminate User’s access to this Website at any time for any reason. The terms hereunder regarding Accuracy of Information and Third Party Rights shall survive termination.

Website Content and Copyright

This Website is the property of Counterpoint and is protected by international copyright law and conventions. We grant users the right to access and use the Website, so long as such use is for internal information purposes, and User does not alter, copy, disseminate, redistribute or republish any content or feature of this Website. User acknowledges that access to and use of this Website is subject to these TERMS OF USE and any expanded access or use must be approved in writing by the Company.
– Passwords are for user’s individual use
– Passwords may not be shared with others
– Users may not store documents in shared folders.
– Users may not redistribute documents to non-users unless otherwise stated in their contract terms.

Changes or Updates to the Website

The Company reserves the right to change, update or discontinue any aspect of this Website at any time without notice. Your continued use of the Website after any such change constitutes your agreement to these TERMS OF USE, as modified.
Accuracy of Information: While the information contained on this Website has been obtained from sources believed to be reliable, We disclaims all warranties as to the accuracy, completeness or adequacy of such information. User assumes sole responsibility for the use it makes of this Website to achieve his/her intended results.

Third Party Links: This Website may contain links to other third party websites, which are provided as additional resources for the convenience of Users. We do not endorse, sponsor or accept any responsibility for these third party websites, User agrees to direct any concerns relating to these third party websites to the relevant website administrator.

Cookies and Tracking

We may monitor how you use our Web sites. It is used solely for purposes of enabling us to provide you with a personalized Web site experience.
This data may also be used in the aggregate, to identify appropriate product offerings and subscription plans.
Cookies may be set in order to identify you and determine your access privileges. Cookies are simply identifiers. You have the ability to delete cookie files from your hard disk drive.