Wonjae Park: Good afternoon, and welcome to LG Electronics quarterly earnings conference call. This conference call will begin with a presentation on the earnings results, followed by a Q&A session. To ask a question, please press star and one on your telephone keypad. Simultaneous English interpretation will be provided for the presentation, followed by consecutive interpretation for the Q&A. Now, I would like to turn the call over to the first speaker. Good afternoon. My name is Wonjae Park from Investor Relations. Thank you for joining our earnings call for the third quarter of 2026. With me are Chang-tae Kim, CFO and EVP of LG Electronics from each company's business division, Jong-In Yoo from HS, Sang-Ho Park, SVP of MS, Ju Yong Kim, VP of VS, and Donghoon Shin, VP of ES.
Wonjae Park: From headquarters, Jihwan Park, SVP of Corporate Business Management, Young Kyoon Kim, VP of Finance, Jaemu Lee, VP of Robotics Strategy Division, In Geun Park, Head of Accounting, and Sung Min Hong, Head of ESG Office. This presentation will proceed as follows. Our CFO will review the Q3 2026 results and Q4 outlook, followed by an update on the progress of our new growth businesses. I will then present the third quarter financial highlights. After that, each business will share its individual results and outlook. Lastly, the Head of the ESG office will present the results of our ESG activities. Please note that all statements made today regarding the third quarter financial results are subject to change in accordance with external review. Actual results may differ from today's outlooks and forward-looking statements due to market uncertainties and strategic adjustments.
Wonjae Park: Now, let us begin with the Q3 2026 performance review and the Q4 outlook.
Chang-tae Kim: Good afternoon. I'm Chang-tae Kim, CFO of LG Electronics. Here are our third quarter results. Consolidated revenue reached KRW 23.8 trillion, and operating income was KRW 781.9 billion, both improving year over year. Despite persistent challenges, including the war in the Middle East and rising interest rates in major markets, we continued to grow revenue supported by our market position and differentiated competitiveness in our core businesses. Home appliances and automotive electronics maintained stable profitability, while TV improved significantly year over year, contributing to company-wide profitability. In particular, automotive electronics has maintained solid mid-single digit plus profitability for seven consecutive quarters, establishing itself as a stable B2B-based cash cow.
Chang-tae Kim: As vehicle connectivity and autonomous driving advance, we will keep expanding the business and develop innovative products to improve our results. In Q4, uncertainties over interest rates, raw material prices, and exchange rates are likely to persist, with the regional demand diverging further. In response, we will continue to advance our proven strategies of B2B expansion, Global South, and two-track to secure growth momentum. In addition, to strengthen our fundamental cost competitiveness, we will improve the efficiency of our global production by leveraging the manufacturing ecosystem in low-cost countries, and diversify our supply chain to build resilience against structural cost changes. Next, I will highlight our progress in our new growth engines and a new opportunity in the AI home solution business. First, in AI data center cooling, tangible results are emerging.
Chang-tae Kim: At our last earnings release, we reported that H1 orders exceeded KRW 600 billion, and forecast that the figure would reach several trillion won by year-end. As reported in the media, we signed a contract with AIR Control Concepts, a leading provider of AIDC infrastructure platforms, to supply cooling solutions for a 5-gigawatt AIDC. Including this contract, cumulative orders as of Q3 exceeded KRW 3 trillion, and our planned order growth is well on track. Given the long-term nature of this agreement, which can provide stable revenue over many years, the market views it as an opportunity for us to strengthen our presence in AIDC cooling. To respond promptly to rapidly growing orders, we are expanding investment in production capacity.
Chang-tae Kim: Next year, we plan to establish a production hub in Virginia, US, where data centers are concentrated with 32,000 square meters of floor area on a 170,000 square meter site, and build new lines in Pyeongtaek and Changwon for a total investment of about KRW 220 billion. We will expand the capacity in phases as orders grow. We are seeing tangible results in expanding our product portfolio. In addition to chillers and air side products, development and productization of coolant distribution units or CDUs, the core component of liquid cooling solutions, are progressing smoothly. Recently, we obtained a qualification from NVIDIA for our 600 kilowatt, 1 megawatt, and 2.6 megawatt CDUs. In addition, our 2.6 megawatt CDU is now DSX Ready, which signifies compatibility with NVIDIA's AI factory platform. This demonstrates our next-generation AIDC technology and positions us for future business.
Chang-tae Kim: We will continue to lead the development of large-scale CDUs that can manage high-density AI servers in a single unit and accelerate our business by winning more projects. Now let me turn to our robotics business. Our strategic direction is to establish ourselves as a solution provider across the entire value chain, from key components and hardware to data platforms and operating systems. Actuator mass production preparations are on track. We built a pilot line in Changwon in H1 and will automate equipment and enhance quality in H2. We expect this to improve our cost and quality competitiveness in robots and secure advantages such as a first-mover position in component standardization. In parallel, we will step up our order-winning activities with potential global customers to deliver tangible business results.
Chang-tae Kim: In humanoid robot development, we plan to launch LG Data Factory, Korea's largest hub for robot learning and data acquisition in Seoul's Umyeon-dong in Q4. It will be the starting point for advancing our Robot Foundation Model's performance, built on our domain expertise in manufacturing, home, and commercial settings, and a collaboration center for partners in Korea and overseas, including NVIDIA. Next is a new business opportunity in AI home solutions. In partnership with global big tech companies, we are pursuing an AI home solutions business built on cutting-edge IoT technologies. By integrating our manufacturing, AI, and customer-centric IoT hardware capabilities into the AI home ecosystem, we will deliver intuitive solutions with tangible results. Finally, to enhance shareholder value, we plan to cancel all 730,000 treasury shares repurchased this year within Q4.
Chang-tae Kim: Next year, we will also pursue multifaceted efforts to enhance shareholder value, including additional shareholder returns of around KRW 100 billion. I will now briefly review Q3 2026 performance across the enterprise and each business. Our consolidated financial results for Q3 were KRW 23.82 trillion in sales and KRW 781.9 billion in operating income. HS recorded sales of KRW 7.04 trillion and operating income of KRW 259.2 billion. MS recorded sales of KRW 5.02 trillion and operating income of KRW 146.7 billion. VS recorded sales of KRW 2.82 trillion and operating income of KRW 190.3 billion. Lastly, ES recorded sales of KRW 2.17 trillion and operating income of KRW 87.2 billion. Next, I will outline the results of our B2B and subscription businesses, the two pillars of our portfolio transformation, which is driving qualitative growth.
Chang-tae Kim: In Q3, B2B revenue grew year-over-year, driven by automotive electronics, where a solid order backlog supported strong sales, and by commercial displays. B2B also maintained a stable share of total company revenue, reinforcing its role as a key driver of qualitative growth. In subscriptions, our Korean business further strengthened its competitive edge through differentiated care services, while sustaining solid quarter-over-quarter and year-over-year sales growth. For overseas subscription business, our business is also expanding actively into new markets, including the Middle East, in addition to core Asian markets such as Malaysia and Thailand. Although we are still in the early stages of global expansion, we will rapidly build country-specific business infrastructure and capabilities to accelerate the growth momentum of our overseas subscription business. We will continue to strengthen our mid to long-term competitiveness and results by advancing our business portfolio, including B2B and subscription.
Chang-tae Kim: Next, we look at the income statement and cash flow for Q3. After accounting for financial income and expenses, equity method gains and losses, other non-operating items, corporate tax, and discontinued operations, Q3 net income was KRW 708.4 billion. Now let's look at cash flow. Cash flow from operating activities was KRW 620.5 billion, while cash flow from investing activities was -KRW 986.9 billion. After reflecting the foreign exchange impact of -KRW 972.2 billion on foreign currency denominated cash, net cash flow was -KRW 1.33 trillion. When reflecting -KRW 471.6 billion in cash flow from financial activities, the cash balance at the end of Q3 stood at KRW 8.25 trillion, down KRW 1.81 trillion from the previous quarter. Key financial positions and indicators for Q3 are as follows.
Chang-tae Kim: At the end of Q3, assets stood at KRW 70.8 trillion, liabilities at KRW 41.2 trillion, and equity at KRW 29.6 trillion. Leverage ratios, including liability to equity, debt to equity, and net debt to equity, remain at healthy levels. Now we will hear from each business company regarding its Q3 results and Q4 outlook. We will now begin with the HS business. Here are the Q3 results for the HS business. Despite persistent uncertainties such as interest rate and FX volatility and a delayed recovery in appliance demand, sales grew year-over-year, driven by growth strategies for our major products, including the two-track and Global South strategies, and by our successful expansion into new sales channels led by subscription, B2B, and online brand shop businesses. We largely contained the cost pressures through structural improvements in operational efficiency, leveraging the low-cost country ecosystem.
Chang-tae Kim: However, operating income declined slightly year-over-year, mainly due to a short-term rise in logistics cost and higher marketing cost to strengthen our brand position. Looking ahead to Q4, we expect demand to diverge, reflecting differences in countries' economic fundamentals between regions affected by persistent geopolitical risks and those benefiting from the rise of AI. As a result, the recovery in global appliance demand is expected to remain limited. We will strengthen our competitiveness by continuing the two-track strategy, which is proving effective even in the inflationary environment of major markets, and by deepening localization, including by launching regionally tailored products in the Global South, which is posting relatively high economic growth. Let's now turn to the Q3 results for our media solution business.
Chang-tae Kim: Sales declined quarter-over-quarter, mainly due to seasonality, but grew year-over-year, thanks to stronger premium TV sales, growth in the webOS platform business, and rising demand in the emerging markets. Operating income continued its upward momentum, posting a significant year-over-year improvement driven by a higher share of premium products, lower material cost, efficient use of marketing resources, and other initiatives to enhance cost competitiveness. Our outlook for Q4 is as follows: Cost pressure continues as prices of core components such as memory and LCD panels rise and supply chain uncertainties persist. With consumer sentiment remaining weak due to high oil prices and interest rates, we expect TV demand to decline year-over-year. In response, we will continue our efforts to strengthen our structural competitiveness, including improving cost competitiveness and operational efficiency.
Chang-tae Kim: In addition, we will increase investment and strengthen execution to deliver differentiated customer value and secure future competitiveness. I will now review the Q3 results for the VS business. Despite uncertainties in the external environment, such as concerns over slowing EV demand, sales grew year-over-year, supported by stable conversion of our order backlog into sales and solid growth in the infotainment business. Operating income improved year-over-year, driven by sales growth and ongoing improvements in our cost structure and operational efficiency. Now let me move on to the Q4 outlook. A meaningful recovery in global automotive demand is likely to remain limited given stagnant EV demand and continued uncertainties in the environment. Accordingly, while closely monitoring market changes and their impact, we will sustain our stable sales growth momentum based on a secured order backlog and achieve stable profitability by strengthening cost competitiveness and operational efficiency.
Chang-tae Kim: I will now review the Q3 result of the ES business. Sales held steady year-over-year, despite weak domestic consumer sentiment and a prolonged slump in the construction sector, as we strengthened our response to commercial HVAC demand in overseas markets such as North America and Europe. Operating income decreased year-over-year, mainly due to lower sales in the Korean market and higher investment in labor cost related to new growth businesses. Let me now move on to the Q4 outlook. The market environment is expected to remain challenging as uncertainties such as the war in the Middle East persist and competition intensified. In response, in the Korean market, we will expand customer touchpoints and strengthen our competitive advantage, focusing on subscription and D2C marketing. Overseas, we will pursue accelerated growth by enhancing product and service competitiveness while responding promptly to large-scale AIDC cooling solution projects.
Sung Min Hong: Lastly, I would like to talk about our ESG activities and results. We continue to strengthen our competitiveness in eco-friendly, high-efficiency technologies. At this year's Energy Winner Awards, we won 12 awards, including three grand prizes, the most in our industry for the tenth consecutive year. In addition, our OLED TVs earned Carbon Trust Carbon Footprint certification for the sixth consecutive year, and all our 2026 new models received Intertek's Resource Efficiency certification. In the circular economy, we are expanding our end-of-life appliance collection and recycling infrastructure. We built a refrigerant recovery and recycling system with the Ministry of Climate, Energy & Environment and established a logistics and recycling base for appliance collection. Finally, our technological capabilities are recognized in cybersecurity and accessibility.
Wonjae Park: We obtained the TÜV Rheinland qualification as a designated EU cybersecurity testing lab, allowing us to run related tests in-house and reduce time and cost for product development and certification. We are also named to Forbes Global 200 Accessibility Innovators list for improving product accessibility, including the US launch of the Comfort Kit for laundry appliances. Going forward, we will turn our ESG achievements into business competitiveness, leveraging our technology to capture growth opportunities in the AI era.
Wonjae Park: That concludes LG Electronics Q3 2026 earnings presentation and Q4 outlook. We will now take your questions. To give more participants a chance to ask, please limit yourself to two questions or fewer. Operator, please open the line.
Operator: 지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼에 별표와 1번을 누르시기 바랍니다. 질문을 취소하시려면 별표와 2번을 누르시면 됩니다.
[Translator 1]: Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone.
Operator: 처음으로 질문해 주실 분은 Bank of America의 Simon Woo님입니다.
[Translator 1]: The first question will be provided by Simon Woo from Bank of America. Please go ahead with your question.
Simon Woo: 예, 질문 기회 주셔서 감사드립니다. 우동재입니다. 저희는 요즘 LG전자가 주력하고 계시는 AIDC와 로보틱스 관련된 질문인데요. 먼저 로보틱스 쪽을 보면 이게 언제부터 이 동 사업 부분이 의미 있는 실적이 좀 나오고, 또한 중장기적인 매출 목표, 수익성, 그다음에 차별화 전략이 어떠신지 전반적으로 말씀해 주시면 감사드리겠습니다. 그리고 두 번째 질문은 우리 LG전자의 AIDC 냉각 솔루션을 보면, 칠러라든지 그다음에 CDU 등 여러 품목이 있는데 이 중에서 우리 LG전자가 상대적으로 어떤 value, 가치 창출이 좀 큰 분야가 어느 품목인지 하고요. 이왕이면 AIDC 냉각 솔루션 사업 내 매출 구성 및 향후 예상되시는 비중 변화 혹시 말씀해 주실 수 있으면 감사드리고요. 또 이런 거를 다 연계했을 때 우리가 ES 본부 전체로 봤을 때 단순한 에어컨만이 아니라 전체적으로 HVAC 사 포함해서 이런 본부 차원에서의 어떤 매출 믹스 변화, 성장률, 수익성도 한번 같이 점검해 주시면 도움이 많이 될 것 같습니다. 감사합니다.
[Translator 2]: Thank you for taking my questions. I have two questions, one on robotics and the second for ES. I know that AIDC is one of LGE's key business areas. When do you expect the business to begin generating meaningful results, including revenue? What are your mid to long-term sales targets and outlook for profitability? Also, in your view, what differentiated strategies will help LGE achieve these goals?
[Translator 3]: As for my second question regarding ES, I would like to know in which areas of the AIDC cooling solutions business LG Electronics has the greatest potential to generate value, such as chillers and CDUs. Could you also provide some color on the revenue mix within the AIDC cooling solutions business? How do you expect this mix to evolve over time? Lastly, how will changes in the product mix affect the growth rate and profitability of ES in comparison with your existing businesses, such as HVAC and air conditioners?
Wonjae Park: 네, 우동재 님 질문 감사합니다. 로보틱스 관련해서는 로보틱스 전략 담당께서 답변을 주시고요. AIDC 관련해서는 ES에서 답변드리면 될 것 같습니다.
[Translator 2]: Thank you for those two questions. The first question on our robotics business will be answered by the Head of Robotic Strategy Division, and the second question on AI data center cooling will be answered by the Head of ES Business Management Division.
Jaemu Lee: 로보틱스 사업 관련해서 답변드리겠습니다. 일단 저희가 타깃하는 시장에 대해서 말씀드리면, 시장이 먼저 형성될 것으로 예상되는 학계나 공공, 그리고 제조 영역그쪽으로 일단 집중할 것 같습니다. 그리고 핵심 부품인 액추에이터 등 초기 양산 시장에서 기술이나 제품 라인업, 그리고 레퍼런스를 확보하면서 제조 물류 시장에서의 리더십을 선점하고, 이후에 휴머노이드 로봇이 본격적으로 개화가 될 수 있는 2030년 정도를 예상하는데 그때 홈 휴머노이드로의 사업을 확대해 나가고자 합니다.
[Translator 2]: To answer your first question on robotics, our approach is twofold. First, we aim to establish an early lead in manufacturing and logistics while developing our technologies and product lineup and building a track record in markets expected to develop first, including academia, the public sector, and manufacturing, as well as in the early stages of mass production for key components such as actuators. Second, from around 2030, when the humanoid market is expected to take off, we plan to expand into home humanoid robots.
Jaemu Lee: 그리고 홈 로봇 같은 경우는 본격적인 시장이 개화되기 이전부터 당사가 가전 사업에서 축적한 경쟁력을 기반으로 가정에 자연스럽게 진입할 수 있는 홈 로봇하고 폼팩터를 준비하고 있습니다. 홈 시장 개발을 위해서는 일단 가정에서 실제 구매를 고려할 수 있는 가격대의 접근이 중요하다고 보고 있고요. 그래서 이런 관점에서 가전을 위해 디자인된 로봇하고, 그다음에 로봇을 위해 디자인된 가전을 통해서 구현할 수 있는 부분이 상당히 있다고 판단하고 있습니다.
[Translator 2]: Even before the home robot market fully opens up, we are developing home robots and form factors that fit naturally into people's homes, drawing on the strengths we have built in our home appliance business. For the home robot market to gain traction, we believe it is important to reach price points at which consumers would realistically consider buying these robots. We believe our approach of robots designed for appliances and appliances designed for robots can help us achieve this.
Jaemu Lee: 그리고 마지막으로 시장 전망이라든지, 매출 목표 관련된 질문 주신 부분에 대해서 답변드리면, 글로벌 컨설팅사인 BCG 전망에 따르면 로보틱스 시장이 2031년에 한 $1,320억, 그리고 2035년에 $2,550억 정도로 연평균 21%의 고성장을 예상하고 있습니다. 특히 2030년부터 Physical AI의 범용성이 확보되면서 앞서 말씀드린 B2B뿐만이 아니고 B2C 시장도 본격적으로 개화기를 맞을 것으로 전망을 하고요. 이러한 고성장 시장에서 당사는 시장을 선도할 수 있는 기민한 대응을 통해서 글로벌 탑티어의 지위 확보를 목표로 적극적인 사업을 추진하고 준비하고 있습니다.
[Translator 2]: Lastly, according to global consulting firm BCG, the robotics market is projected to grow from $132 billion in 2031 to $255 billion in 2035, representing a CAGR of 21%. As Physical AI becomes capable of handling a wider range of tasks after 2030, both the B2B and B2C markets are expected to expand. Against this backdrop, we are actively pursuing our goal of becoming a top-tier global player through an agile approach aimed at establishing market leadership. Thank you.
Donghoon Shin: AIDC 냉각 솔루션 사업 내 매출 구성 및 향후 수익선 전망 질문에 대해서 답변드리겠습니다. 저희의 제품 포트폴리오는 현재 기준으로는 칠러 중심으로 매출을 창출하고 있으며, 이러한 칠러 경쟁력을 기반으로 사업을 확대하는 동시에 CDU 등의 액체 냉각 제품과 Fan Wall Unit 등 에어 사이드 제품까지 제품 구성을 확대해 나갈 계획입니다.
[Translator 3]: Let me answer your question regarding AIDC cooling solutions of ES. From a product portfolio perspective, LG Electronics AIDC cooling solutions business currently generates revenue primarily from chillers. Going forward, we plan to continue expanding the business based on our chiller competitiveness while broadening our product mix to include liquid cooling products, such as CDUs and air side products such as FWUs.
Donghoon Shin: 중장기적으로는 이러한 개별 제품 공급을 넘어서 냉각 설비 전반의 설계 및 제어, 그리고 유지 보수까지 제공하는 통합 냉각 솔루션으로 사업 범위를 넓혀갈 계획이고, 이를 통해 현재 칠러 중심의 매출 구성도 점차 다변화될 것으로 보고 있습니다. 아울러 지역 확산 전략 관점에서는 시장 수요가 가장 큰 미국을 중심으로 중동, 아시아 등 지역 포트폴리오의 확장 또한 추진 중입니다.
[Translator 3]: Over the medium to long term, we plan to expand our business beyond the supply of individual products to integrated cooling solutions that encompass the design, control, and maintenance of the entire cooling system. As a result, we expect our current chiller-centric revenue mix to become increasingly more diversified over time. In terms of our regional expansion strategy, we are broadening our geographic footprint beyond the US, which is our largest market in terms of demand into other regions such as the Middle East and Asia.
Donghoon Shin: 이러한 제품 포트폴리오의 확대, 그리고 통합 솔루션 공급자로서의 위상 확보, 아울러 지역 커버리지 확산 전략이 순조롭게 진행된다면 사업 성장 가속화를 통한 시장 지위 개선 그리고 규모의 경제 효과 확보, 마지막으로 고부가가치 제품 그리고 서비스 매출 확대가 가능해지기 때문에 기존의 HVAC 사업과 비교하더라도 수익성 측면에서 또한 상당한 개선 효과를 기대할 수 있을 것으로 전망합니다. 다만, 구체적인 중장기 매출 목표와 제품별 매출 비중은 현시점에서는 공개하기 어려운 점 양해 부탁드립니다.
[Translator 3]: If we continue to make steady progress in expanding our product portfolio, establishing ourselves in an integrated cooling solutions provider, and broadening our regional coverage, we expect to strengthen our market position through accelerated business growth, realize economies of scale, and expand revenue from high value-added products and services. Accordingly, we believe this business will offer significant profitability upside compared with the conventional HVAC business. However, we ask for your understanding that it is difficult to disclose specific medium to long-term revenue targets and the revenue mix by product at this time. Thank you.
Wonjae Park: 다음 질문 부탁드립니다.
[Translator 3]: Next question, please.
Operator: 다음으로 질문해 주실 분은 삼성증권의 이종욱 님입니다.
[Translator 1]: The following question will be presented by Jong Wook Lee from Samsung Securities. Please go ahead with your question.
Jongwook Lee: 질문 기회 주셔서 감사합니다. 환율과 로보틱스 두 질문드리도록 하겠습니다. 먼저 한때 1,500원대로 유지되던 미국 달러 환율이 크게 하락한 모습입니다. 글로벌 사업을 진행하는 당사의 사업 구조를 볼 때 이런 달러 환율 변동이 매출과 손익 측면에서 각각 어느 정도 영향을 주는 것인지 궁금합니다. 다음으로는 로보틱스인데요. LG Data Factory의 진행 상황 그리고 향후 로드맵이 궁금합니다. Data Factory 외부 고객 대상으로 유료 실증 사업을 하는 것과 같이 수익 사업화 계획이 있으신지, 그리고 NVIDIA와의 구체적인 협업 현황, 마지막으로 향후 계획도 공유 부탁드립니다. 감사합니다.
[Translator 2]: Thank you for taking my questions. I have two questions, one for FX and one for robotics. My first question for the foreign exchange is that the USD 1 exchange rate has fallen sharply after holding at around KRW 1,500. Given your global operations, to what extent is this currency movement affecting LG? Could you walk us through the impact on revenue and on profit loss under the current business structure? Secondly, could you update us on the LG Data Factory and outline its roadmap? Do you have plans to commercialize it, such as through paid pilot projects for external customers? Could you also share an update on your collaboration with NVIDIA and your plans going forward?
Wonjae Park: 질문 감사합니다. 환율 관련해서는 경영관리 담당이신 박 팀장님께서 말씀해 주시면 좋겠고요. Data Factory는 로보틱스 전략 담당 부탁드리겠습니다.
[Translator 2]: The first question on the foreign exchange will be answered by the Head of Corporate Business Management Division, and the second question on the Data Factory will be answered by the Head of Robotic Strategy Division.
Jihwan Park: 경영관리 담당입니다. 다수의 이종 통화로 거래가 이루어지는 당사의 글로벌 오퍼레이션 특성상 환율 변동은 상당 부분 자연히 헷지가 되는 구조를 가지고 있습니다. 원화 강세는 달러, 유로 등 주요 판매 국가의 원화 환산 매출이 감소되나 중국, 베트남 등 주요 생산지 원가에는 개선 요인으로 작용하는 부분도 있습니다. 따라서 각 통화별 거래 기준과 원화 대비 가치 변동 폭에 따라서 손익에 주는 영향 수준은 상이하게 작동합니다.
[Translator 2]: To answer your first question, with transactions in multiple currencies across our global operations, we have a substantial natural hedge against exchange rate movements. A stronger won reduces the won value of revenue denominated in US dollars, euros, and other major currencies. At the same time, it can lower production costs in won terms in countries such as China and Vietnam. As a result, the overall impact on earnings depends on the share of transactions in each currency and how much each currency moves against the won.
Jihwan Park: 그러나 최근의 환율 변동은 대부분의 주요 통화 대비 원화가 강세를 나타내고 있는 상황이긴 하나, 전사 관점에서 헷징 효과는 기존 대비 다소 악화된 상황이긴 합니다.
[Translator 2]: However, the won's recent strength against most major currencies is somewhat weakening our company-wide hedging efforts.
Jihwan Park: 당사는 통화별 exposure를 지속적으로 모니터링하는 한편, 스윙 생산 등 글로벌 생산지 전략을 지속 강화하고 환 시나리오 플랜을 정교화하면서 지역별 가격, 제품 믹스 및 원가 경쟁력 개선 등을 통해 환율 변동에 따른 영향을 최소화할 계획입니다.
[Translator 2]: To minimize the impact of exchange rate movements, we plan to continue monitoring our exposure to each currency, further strengthen our global production strategy, including swing production, and refine our FX scenario planning while optimizing pricing by region and improving product mix and cost competitiveness.
Jaemu Lee: 다음 로봇 관련된 답변 드리겠습니다. 당사의 로보틱스 사업은 단품 디바이스 중심의 연구용 제품부터 서비스 영역에서의 SI 파트너사와 협업하는 버티컬별 하드웨어 소프트웨어 패키징 솔루션 사업, 그리고 마지막으로 데이터 팩토리에서의 데이터 판매 및 구축 사업까지 다양한 사업 모델을 기획하고 있습니다.
[Translator 2]: To answer your second question on robotics. We are planning a range of business models in robotics. These include research products incorporating standalone devices, vertical specific package hardware, software solutions developed with SI partners for the service sector, and data sales and data set development.
Jaemu Lee: 질문 주신 데이터 팩토리의 외부 고객 대상의 유료 실증 사업화는 중장기적으로는 검토하고 있는 방향이지만 현재는 자사 로봇 성능의 고도화를 위한 내부 활용에 우선순위를 두고 있습니다. 따라서 외부 사업화와 관련돼서는 향후 사업 모델이 구체화되면 소통드릴 수 있도록 하겠습니다.
[Translator 2]: We are considering paid pilot projects for external customers as a mid to long-term opportunity for the data factory. For now, however, our priority is to use it internally to enhance the performance of our own robots. We will share further details on our plans for external commercialization as the business model takes shape.
Jaemu Lee: 그리고 NVIDIA와는 레퍼런스 로봇을 기반으로 기술 고도화를 위한 협업을 지속적으로 진행하고 있고요. 당사가 기존 사업 영역에서 확보한 가정 그리고 제조 현장에서의 도메인 경쟁력을 기반으로 실제 환경을 그대로 모사한 환경에서 real-world data 수집을 빠르게 진행하고 있습니다. NVIDIA와는 시뮬레이션 그리고 World 모델, 로봇 개발 플랫폼 등 Physical AI 기술 전반에서 협업하고 있고, 실데이터와 가상 데이터를 결합해서 내년에 누적 약 50만 시간 분량의 학습 데이터를 확보하는 데이터 선순환 체계를 구축하고 있습니다.
[Translator 2]: We continue to work with NVIDIA to advance our technologies using reference robots. Drawing on the domain expertise we have built in home and manufacturing environments through our existing businesses, we are rapidly collecting real-world data in an environment that closely replicates actual operating conditions. We are also collaborating with NVIDIA across a broad range of Physical AI technologies, including simulation, World 모델, and robot development platforms. By combining real-world and synthetic data, we are building a virtuous data cycle and aim to accumulate approximately 500,000 hours of training data by year-end. Thank you.
Wonjae Park: 다음 질문 부탁드리겠습니다.
[Translator 2]: Next question, please.
Operator: 다음으로 질문해 주실 분은 미래에셋증권의 박준서 님입니다.
[Translator 1]: The following question will be presented by Junseo Park from Mirae Asset Securities. Please go ahead with your question.
Junseo Park: 안녕하세요. 질문 기회 주셔서 감사합니다. 저는 두 가지 질문드리겠습니다. 첫 번째는 HS 사업부 관련입니다. 최근 중국 가전 업체들이 프리미엄 제품군을 확대하고 해외 시장 점유율도 높이려고 하고 있는데요. 이러한 경쟁 환경이 LG전자의 시장 지위에 미치는 영향, 그리고 차별화 전략에 대해서 말씀 부탁드립니다. 그리고 두 번째는 MS 사업부 관련입니다. 최근 LCD 패널 업체들의 가격 인상 움직임이 나타나고 있는데요. 향후 패널 가격 전망과 TV, 모니터, 노트북 등 주요 제품의 원가 및 수익성에 미치는 영향, 그리고 이에 대한 대응 방안에 대해 말씀 부탁드립니다. 감사합니다.
[Translator 3]: Hi. Thank you for taking my question. I actually have two questions. One for HS and one for MS. As for my first question regarding HS, it seems to me that Chinese home appliance brands are expanding their product portfolios into premium products and strengthening their positions in overseas markets. I would really appreciate your assessment of the competitive landscape involving your competitors in terms of your market position as well as differentiation strategies.
[Translator 2]: My second question is for MS. LCD panel manufacturers appear to be seeking price increases. Could you walk us through the following? First, the outlook for LCD panel prices. Second, the impact on the cost and profitability across key products including TVs, monitors, and laptops, and how you plan to respond forward.
Wonjae Park: 네, 위원님 질문 감사드립니다. 위원님께서 담당님들을 딱 지정해 주셔서 각 담당님들이 답변드리면 될 것 같습니다.
[Translator 3]: Thank you for your questions and thank you for your efforts to assign the relevant people to answer your questions. That was really convenient for me. The first question will be answered by the Head of HS Business Management Division, and the second question will be answered by the Head of MS Business Management Division.
Jong-In Yoo: 중국 업체 대비 경쟁 현황에 대해 말씀드리겠습니다. 상반기 시장 점유율 기준 당사의 해외 시장 점유율은 중국 업체 대비 유의미한 수준의 개선을 보였습니다. 특히 북미 지역 중심으로 중국 업체에 대한 경쟁 우위가 강화되고 있으며, 미국 주요 유통 채널 내 점유율 확대 등이 긍정적으로 작용하였습니다. 또한 기존 전통 경쟁사들의 실적 부진 및 수익성 악화에 따른 구조조정, 사업 재편 등도 당사에게는 새로운 사업 기회 요소로 작용하고 있는 측면도 시장 지위 강화에 기여하고 있다고 판단됩니다.
[Translator 3]: Let me answer your question for HS regarding the competitive landscape. In the first half, our overseas market share improved meaningfully relative to Chinese competitors. This was primarily driven by our strengthening competitive advantage over Chinese players, particularly in North America, as well as market share gains across major U.S. retail channels. We also believe that the underperformance of our traditional competitors, as well as their restructuring and business realignment due to deteriorating profitability, are creating new business opportunities for us and contributing to the strengthening of our market position.
Jong-In Yoo: 하지만 미국 시장에서의 중국 업체를 포함한 글로벌 업체 간의 협업 확대와 중국 유통기업의 유럽 시장 영향력 강화 등의 경쟁 환경 변화도 동시에 나타나고 있기 때문에 경쟁은 더욱 치열해질 것으로 예상됩니다.
[Translator 3]: Meanwhile, the competitive landscape is changing. It is largely driven by increased collaboration among global players, including Chinese companies in the U.S. market. In addition, Chinese retailers are strengthening their presence in Europe. As a result, competition is expected to intensify further.
Jong-In Yoo: 당사는 프리미엄 진입 장벽 강화 및 보급형 점유율 확보를 동시에 추진하고 기민한 시장 수요 대응을 통해 시장 경쟁 지위 개선을 이어가고자 합니다.
[Translator 3]: We intend to further improve our competitive position by simultaneously raising barriers to entry in the premium market and expanding our market share in the mass market segment, all while responding swiftly to market demand. Thank you.
Sang-Ho Park: 이어서 디스플레이 패널 가격 관련 질문에 대해서 답변을 드리겠습니다. LCD TV와 모니터에 들어가는 패널 가격은 제조 원가 상승과 또 패널 업체들의 감산, 가격 인상 움직임 등의 영향으로 올해 4분기에는 강보합세를 유지할 것으로 보고 있고, 내년 1분기부터는 상승 압력이 더욱 증가될 것으로 예상하고 있습니다. 또한 TV의 경우에는 대형 인치 패널 수요 증가가 눈에 크게 보이고 있기 때문에 더욱 가격 상승 요인으로 작용할 것으로 보고 있습니다.
[Translator 2]: To answer your second question on panel prices, we expect LCD, TV, and monitor panel prices to remain stable to slightly higher in Q4 of this year, with upward pressure intensifying from Q1 of next year. This reflects rising manufacturing costs, production cuts by panel makers, and their efforts to raise prices. Growing demand for larger TV panels is also expected to contribute to higher prices.
Sang-Ho Park: 이러한 패널 가격 상승은 당사의 주요 제품의 제조 원가 부담으로 작용할 것으로 예상하고 있고, 특히 가격 경쟁이 심화된 중저가 제품군에서는 원가 상승분을 판매 가격으로 반영하는 것이 제한적이기에 수익성 부담이 가중될 수 있는 상황입니다.
[Translator 2]: Higher panel prices are expected to put upward pressure on manufacturing costs for our key products. Profitability could come under greater pressure, particularly in the entry-level and mid-range segments where intensifying price competition limits our ability to reflect cost increases in selling prices.
Sang-Ho Park: 당사는 패널 시장의 수급 및 가격 동향을 면밀히 모니터링하면서 공급선을 다변화하고 전략적 구매 시점도 최적화를 통해서 원가 상승 영향을 최소화해 나가고자 합니다. 아울러 주요 패널 업체들과의 전략적 협력을 강화해서 공급 안정성을 확보하고, 중장기 원가 경쟁력을 지속적으로 높여나가는 활동을 전개하겠습니다.
[Translator 2]: To minimize the impact of higher costs, we are closely monitoring supply and demand conditions and panel price trends while diversifying our suppliers and optimizing procurement timing. We will also strengthen strategic partnerships with key panel makers to secure a stable supply and continue to enhance our cost competitiveness over the mid to long term.
Sang-Ho Park: 또한 패널뿐만 아니라 메모리 등 주요 원재료 상승에 대응해서 저희들이 부품 스펙을 최적화한다거나 공급선을 이원화하는 등 원가 절감 활동을 더 강화하고 공급망 효율화를 추진해가면서, 시장에서는 프리미엄 제품 판매 확대를 통한 믹스 개선, 또한 경쟁 비용 축소를 해 나가서 시장 상황에 따른 최적의 판가 운영을 지금 계획하고 있습니다. 이상입니다.
[Translator 2]: In response to rising prices of key components, such as panels and memory chips, we are pursuing cost reduction initiatives, including optimizing component specifications and dual sourcing while improving supply chain efficiency. We also plan to manage pricing in line with market conditions while improving our product mix through increased sales of premium products and reducing costs associated with price competition. Thank you.
Wonjae Park: 다음 질문 부탁드립니다.
[Translator 2]: Next question, please.
Operator: 다음으로 질문해 주실 분은 SK증권의 박형우 님입니다.
[Translator 1]: The following question will be presented by Hyungwoo Park from SK Securities. Please go ahead with your question.
Hyungwoo Park: 안녕하세요. SK증권 박형우입니다. 두 가지 질문 중에 먼저 HS 관련 질문인데요. 다각도로 여쭤보겠습니다. 최근에 온인치 수나 메모리, 기타 부품 원자재 가격이 계속해서 오르고 있습니다. 수익성 영향이 어떻게 되시는지 궁금하고요. 그리고 올해 4분기와 내년에 대한 전망은 어떻게 보시는지도 같이 여쭤보고 싶습니다. 가능하다면 가지고 계신 전망과 함께 대응 방안도 알려주시면 감사하겠습니다. 두 번째는 VS 관련해서 ADAS가 최근에 효자 사업인데, 우리 ADAS 중장기 사업 전략이 무엇인지, 그리고 이와 연관된 전기차 시장 현황과 향후 전망을 어떻게 보시는지도 궁금하고요. 마지막으로 LG Magna e-Powertrain 사업 전망이랑 멕시코, 헝가리 신규 공장 가동률 현황까지 여쭤보고 싶습니다. 감사합니다.
[Translator 3]: Hi. Thank you for taking my question. I have two questions, one for HS and one for VS. First, I would like to ask my questions from multiple perspectives. My first question is regarding container freight indices, which have been recently rising while prices of raw materials, including memory chips, also appear to be continuing their upward trend. To what extent are these factors affecting your profitability, and what is your outlook for Q4 of this year and for next year? I would also appreciate an explanation of how LG Electronics plans to respond. Next, as for VS, could you share LG Electronics' medium to long-term strategy for ADAS, which is emerging as a cash cow business? How do you view the current state of the EV chasm in the global EV market and its future development?
[Translator 3]: Lastly, how do you see this affecting LG Magna e-Powertrain's business prospects, and what are the current utilization rates of the new plants in Mexico and Hungary? Thank you.
Wonjae Park: 질문 감사합니다. HS VS 경영관리담당님 말씀 좀 부탁드리겠습니다.
[Translator 3]: The first question regarding costs will be answered by the head of HS Business Management Division, and the second question regarding the automotive electronics business will be answered by the head of VS Business Management Division.
Jong-In Yoo: 운임지수 상승과 원재료 상승 영향하고 이에 대한 대응 방안 답변드리겠습니다. 해상 운임은 지정학적 리스크, 항만 혼잡 및 선복 공급 조정 등의 영향으로 높은 수준이 지속되고 있습니다. 특히 중동 전쟁 심화 양상과 선복 수급 불균형으로 일부 지역에서는 추가 비용도 발생하는 등 물류비 안정화 시점이 기존 예상 대비 다소 지연될 우려가 있습니다.
[Translator 3]: Let me address your question for HS regarding freight rates, raw material price increases, and our responses. First, ocean freight rates remain elevated due to geopolitical risks, port congestion, and adjustments in shipping capacity. In particular, the escalation of the conflict in the Middle East and imbalances in shipping capacity supply and demand resulted in additional costs in certain regions. This raises concerns that logistics costs may take somewhat longer to stabilize than we had previously anticipated.
Jong-In Yoo: 다만 11월 이후에는 성수기 수요 완화와 해상 적체의 점진적 해소에 따라 운임 상승 압력이 둔화될 것으로 보이며, 시장 조사 기관의 전망 역시 물류비 지수의 점진적 안정화 흐름을 예상하고 있습니다. 또한 차년도에는 신조선 투입에 따른 선복 공급 확대 및 운송 리드 타임 완화로 해운 수급 불안이 점차 해소될 것으로 예상됩니다.
[Translator 3]: However, from November onward, upward pressure on freight rates is expected to ease as peak season demand moderates and maritime congestion normalizes over time. Market research firms also forecast a gradual stabilization of logistics cost indices. Furthermore, supply-demand imbalances in the shipping market are expected to gradually ease in the coming year as newly built vessels enter service, increasing shipping capacity and helping to reduce transportation lead times.
Jong-In Yoo: 이에 당사는 특정 선사들과의 장기 계약을 통해 운임 및 선복 운영의 안정성을 확보하는 한편, 운임 하향세가 전환되면 상시 비딩 및 선사 재협상을 통해 시장 운임 변동을 적기에 반영할 계획입니다. 아울러 생산 물동 평준화 및 이에 맞춘 선적 운영을 통해 차기 성수기 대응 재고를 선제적으로 확보함으로써 운임 변동 영향을 최소화하고 안정적인 공급 계획을 구축해 나갈 예정입니다.
[Translator 3]: In response, we plan to secure stability in freight rates and shipping capacity through long-term contracts with selected shipping lines. In addition, we also seek to reflect changes in market freight rates in a timely manner through ongoing bidding and contract renegotiations when freight rates begin to decline. In addition, we will level production volumes and align shipping operations accordingly. By doing so, we plan to minimize the impact of freight rate fluctuations and establish a more stable supply system by securing inventory ahead of the next peak season. Thank you.
Ju Yong Kim: VS본부 관련 질문에 답변드리겠습니다. 첫 번째로, ADAS 중장기 전략 관련돼서는 VS본부는 전장 아키텍처 통합 트렌드와 자율주행 시장의 고도화에 대응해서 기존의 차량용 인포테인먼트 사업을 통해 축적한 역량을 토대로 IVI 및 AD, ADAS 관련 HPC 사업으로 사업 영역을 확대하고 있습니다. 이를 위해 사업 역량 및 경쟁력 강화 측면에서 핵심 기술 및 솔루션 확보를 위해서 내부 역량 고도화와 함께 외부 협력 가능성을 포함한 다양한 전략적 시책 방안을 추진하고 있으며, 이를 통해 미래 전장 시장의 핵심 사업 영역에서 성장을 지속할 계획입니다.
[Translator 3]: Let me answer your question for VS on our mid to long-term strategies for ADAS. In response to the trend toward integrated automotive electronics architectures and the advancement of autonomous driving, VS is expanding into the HPC segment for IVI and AD/ADAS. To support this, we are leveraging the capabilities we have built through our existing in-vehicle infotainment business. To further strengthen the business capabilities and competitiveness needed to drive this expansion, we are pursuing various strategic initiatives. These include enhancing our in-house capabilities and exploring external partnerships to secure key technologies and solutions. Through these efforts, we aim to sustain growth in the key areas of the future automotive electronics market.
Ju Yong Kim: 두 번째로 글로벌 전기차 시장은 단기적으로는 캐즘 영향하고, 그다음에 지역별 정책 및 수요 환경 등에 따라서 지역별 성장 속도가 현재 차이가 많이 나고 있습니다. 이에 따라서 완성차 OEM들도 시장 상황에 맞춰 전동화 전략과 제품 라인업을 유연하게 조정하고 있으며, 이런 영향으로 인해서 기존 예측 대비 현재 성장이 지연되고는 있으나, 중장기적으로는 전동화 전환의 방향성은 지속될 것으로 보고 있기에 향후에는 지속 성장할 것으로 보고 있습니다.
[Translator 3]: Secondly, in the short term, global EV market growth differs across regions due to the EV chasm, as well as differences in local policies and demand conditions. In response, automotive OEMs are flexibly adjusting their electrification strategies and product lineups in line with market conditions. As a result, market growth has been slower than originally anticipated. Nevertheless, we expect the trend toward electrification to continue in the medium to long term, thereby enhancing the growth rate of the EV market.
Ju Yong Kim: LG Magna는 이러한 시장 변화에 대응해서 배터리 EV뿐만 아니라 하이브리드 등 다양한 전동화 영역에서 제품 포트폴리오를 확대해 왔으며, 아울러 북미 위주의 거래선 구조를 한국, 아시아 및 유럽 OEM을 추가해서 고객 포트폴리오를 다변화했기 때문에 향후 전동화 전환 추세가 개선된다면 안정적인 사업 성장이 가능할 것으로 보고 있습니다. 글로벌 생산 거점도 이러한 제품 고객 포트폴리오에 맞춰서 멕시코 공장이 2023년 9월 가동 이후에 지속적으로 램프업을 거쳐서 현재 생산 안정화 단계에 진입하고 있으며, 현재로는 전체 매출 내 40% 이상의 비중을 유지하며 사업 성과 개선에 기여하고 있습니다. 아울러 헝가리 공장은 유럽 OEM들의 밸류체인 내재화 요구에 대응하는 핵심 거점으로 2027년 2월 양산을 목표로 현재 차질 없이 진행되고 있습니다. 감사합니다.
[Translator 3]: In response to these market changes, LG Magna has broadened its product portfolio beyond EVs to cover a wider range of electrification segments, including HEVs. It has also diversified its customer base, which was previously concentrated in North America, by adding Korean, other Asian, and European OEMs. With these efforts, LG Magna is expected to achieve stable growth if the pace of electrification gradually recovers. In line with its expanded product portfolio and diversified customer base, LG Magna's Mexico plant, which began operations in September 2023, has undergone continuous ramp-up and has now entered a stable production phase. The plant currently accounts for more than 40% of total sales, contributing to improved business performance. Meanwhile, LG Magna's Hungary plant will serve as a key production base to support European OEMs' efforts to localize their value chains. Preparations are progressing as planned, mass production targeted for February 2027. Thank you.
Wonjae Park: 다음 질문 부탁드립니다.
[Translator 3]: Next question, please.
Operator: 현재 질문을 요청하신 분은 없습니다. 질문을 하실 분은 전화기 버튼에 별표와 1번을 누르시기 바랍니다.
[Translator 1]: Currently there are no participants with questions. Please press star and one to get questions.
Wonjae Park: 오퍼레이터님, 저희가 예상했던 시간이 이제 다 된 것 같아요. 추가적인 질문이 없으시면 여기까지 하도록 하겠습니다. 그럼 이상으로 2026년도 3분기 LG전자 실적 발표 컨퍼런스 콜을 마치도록 하겠습니다. 이 시간 이후에 추가적인 질문이 있으시면 LG전자 IR팀으로 연락 주시면 자세한 설명을 드리도록 하겠습니다. 기온차가 많이 큽니다. 환절기 건강 잘 챙기시고 다음 분기에 또 뵙겠습니다. 감사합니다.
[Translator 3]: It seems that we don't have any further questions for today's call. With that, we conclude LG Electronics Q3 2026 earnings conference call. Should you have any further questions following today's call, please contact the LG Electronics IR team, who will be happy to provide additional information. The weather is getting chillier, especially at night, so please take care and stay healthy. Thank you for your participation.
