LG Electronics CEO Ryu Jae-cheol's Robot Ambitions: What's Behind the Competitiveness

[Korea Financial Times, Gwak Horyung] Even amid global economic headwinds and mounting tariff barriers, LG Electronics has remained remarkably resilient — and the driving force behind that stability is the power of its core business: home appliances. The steady cash flows and financial credibility generated by the home appliance segment are serving as a solid launchpad for new ventures, including chillers and robotics.

This brings to mind the "fundamental competitiveness" of Ryu Jae-cheol, President and CEO of LG Electronics, who began his career at the Home Appliance Research Lab of GoldStar (now LG Electronics) and climbed to the top after steering the company to global leadership in home appliances.

LG Electronics' Altman Z-score has shown a gradual declining trend: 2.51 in 2021, 2.50 in 2022, 2.36 in 2023, 2.18 in 2024, and 2.15 in 2025.

At first glance, this appears to indicate a year-on-year deterioration in financial health. Among the sub-indicators, the profitability metric (operating income/total assets) — which carries the highest weighting in the Z-score model — fell from 0.072 in 2021 to 0.036 in 2025, before a modest recovery to 0.040 in the first quarter of this year.

The biggest drag on overall corporate profitability is the underperformance of the MS (Media Solution) Division, which oversees TVs, monitors, and PCs. The profitability problem is clearly concentrated in the television segment.

The TV division, which generated an operating profit of KRW 1.1 trillion in 2021, recorded a loss of KRW 750 billion last year. The primary cause is attributed to a surge in costs and a loss of market share as the company battles Chinese manufacturers such as TCL and Hisense, which have been aggressively competing on price.

In the first quarter of this year, however, the division successfully returned to profitability, driven by workforce optimization measures — including voluntary early retirement programs implemented preemptively last year — and an expanded push into higher-margin OLED TVs. Analysts caution, however, that the road to full business normalization remains long, with losses expected to resume in the second half of the year.

Nonetheless, LG Electronics continues to benefit from a solid floor of support built on the longstanding product credibility it has established on the global stage.

The short-term liquidity indicator (working capital/total assets) improved to 0.13 in Q1 of this year, up from 0.07 in 2021. Over the same period, retained earnings grew from KRW 14.43 trillion to KRW 18.18 trillion.

Even amid persistent external headwinds — including U.S. tariffs that began to take full effect in the second half of last year and the outbreak of the U.S.-Iran war in March of this year — the business foundation built through the home appliance segment continues to generate a stable earnings flow.

The company is also reaping the benefits of a structural shift toward business-to-business (B2B) transactions, which generate more consistent performance. LG Electronics has raised its B2B revenue share — spanning home appliance subscription services, webOS, HVAC systems, and vehicle components (VS Division) — to 36% of total revenue, reducing earnings volatility in the face of external uncertainties.

On the back of this shift, free cash flow (FCF) has also rebounded. LG Electronics recorded FCF of KRW 82.5 billion in Q1 of this year, successfully turning positive after two consecutive years of negative FCF in 2024 and 2025.

This improvement has not come at the expense of investment. Capital expenditure (CAPEX) in Q1 stood at KRW 1.1696 trillion, maintaining an annual investment trajectory of approximately KRW 4 trillion.

One area that warrants closer scrutiny, however, is that a significant portion of the working capital increase stems not from cash but from accounts receivable and inventory assets.

The company disclosed that accounts receivable — outstanding payments from customers — reached KRW 12.43 trillion in Q1 of this year, a rise of 11% in just three months. The inventory ratio (16.4%) is trending upward, approaching levels last seen during the COVID-19 pandemic in 2021 (18.2%).

As external headwinds persist, the pace at which the company collects receivables and clears inventory will likely serve as a critical barometer of "qualitative growth."

LG Electronics' true "value-up" is expected to materialize when tangible results emerge from its new businesses in chillers (large-scale industrial cooling systems) and robotics.

The chiller business appears to be scaling faster than anticipated. Shin Dong-hun, Executive Vice President and Finance Director of LG Electronics' ES (Energy Solution) Division, said during the Q1 earnings conference call: "We expect the chiller business to achieve its KRW 1 trillion revenue target, which was originally set for 2027, ahead of schedule."

A delegation of UAE government officials and representatives of state-owned investment funds visited LG Electronics' Pyeongtaek chiller manufacturing plant earlier this month, signaling that the company's chiller business targeting AI data centers is set to gain full momentum.

The robotics segment has also begun executing a concrete commercialization roadmap. The company has set out a plan to fully launch Axiom — a key robot actuator component — this year, and to commercialize its home robot CLOi d by 2028. The strategy is to consolidate the Group's robotics capabilities in order to secure leadership in the physical AI ecosystem.

Gwak Horyung (horr@fntimes.com)