LG India wants to make life better

At the Consumer Electronics Show (CES) in Las Vegas, U.S., this year, South Korea-based LG Electronics made quite a buzz with its rollable OLED television, which rolls up out of a rectangular box when you want to watch it and can be rolled back in when you don’t. While the rollable TV is yet to hit the market, LG is targeting the premium segment in the country with its other products, says Ki Wan Kim, managing director, LG Electronics India.

A veteran of the Fortune Global 500 company, Kim has spent nearly four decades expanding LG’s business in Germany, Austria, Eastern Europe, West Asia, and Africa. In an interview with Fortune India, he spoke about his experience, the company’s plans for the country—why he thinks Indians understand advanced technology despite their economic conditions, the competition, and where he sees growth coming from. Edited excerpts:

In 2015 when you came to India, were there any goals that you set for yourself? You’ve been in many countries with LG, is the Indian market different?

For Koreans, India means potential. My mission is materialising that potential into real performance—revenue, profit, and establishing the brand image—as the No. 1 brand. I spent three-and-a-half years here and found some differences. Among other things the number one difference is, it’s hard to change something in India. In many areas, not just the government, individuals and people are good at keeping the tradition. They have a very strong tendency to maintain what they have cherished. Change is possible when they have some curiosity. Indians, comparatively, have less curiosity about something different, something new. I was born in 1958, five years after the Korean War ended. The country was poor before but after years of war, everything was demolished. But [after the war] every year we improved. Korea is the first country to develop like that after the Second World War. It was nothing else but curiosity. Even in Europe and some western countries, all great people questioned traditions. But those things aren’t happening here. Operating the business is similar. I tried to change many things but it is hard.

Like you said Indians find it tough to break habits. As a technology and consumer appliances company, how do you overcome that?

It’s not easy to convince our consumers. To change their mindset in favour of LG, we are offering an experience of the LG products. I call it experience marketing. So, instead of investing our money on TV or newspaper advertising we offer experience; what they themselves experience, they value; we offer home demos—try and buy.

LG also has some interesting India-specific innovations in its products. Could you take us through LG’s R&D in India?

We have two R&D centres in India—one in Bengaluru and one in Noida. They are developing many India-specific technologies and design. We don’t take tech and design from Korea or anywhere else. We don’t just make in India—from the development, manufacturing, design, R&D, sales and marketing, everything—almost 95%—is localised. Secondly, the Indian government is inviting a lot of foreign direct investment (FDI) but mainly for final assembly; with that, it cannot develop technology substantially. They have to invite core components like semiconductors as well.

How has 2018 been, what are the highs and lows?

It was a very challenging year. In terms of volumes and numbers, we didn’t grow substantially; it was almost flat. But quality-wise, there were some achievements. The premium portion increased. As we have done every year, last year also we successfully launched new technology. For example, take inverter technology: We started with some limited inverter models in 2012 but by 2017, we shifted 100% air conditioning to inverters. In washing machines and refrigerators also, we are applying inverter technology—very advanced technology for energy savings. In this regard, it was a meaningful year.

Do you believe the premium segment is going to be the growth driver in India?

For many people, it is a fixed concept. They think because India is poor so demand for premium is not there. If you look at the details, the demand trends are different. For instance in television, a major portion of demand was for 24 or 32 inch; now the demand for the 24 inch has declined. The consumer has become very value conscious, Indians are smart, they are not making decisions because something is only `1,000–2,000 cheaper. Earlier, it was about the lowest price but not anymore. That’s why it is the right time to pursue premium.

At the CES, LG emphasised on new technologies like artificial intelligence (AI). Is the focus on new technologies in India as well?

We are leading already. LG has the AI ThinQ TV (with voice-activated control). We also have IoTincorporated washing machines. Some people see future potential in India but lower in the market; actually, it isn’t so. We are targeting both with a bipolar strategy. There are still people who look at value for money but the premium segment is increasing.

What is the percentage of revenue from connected products?

It is still small. But I am very positive, I see huge potential. Indians are very smart, they are very knowledgeable. For their economic level, their knowledge of high tech is very high.

LG spoke about 5G technology at CES. What’s the plan for India?

Not yet. There is still not enough 4G content. Without 5G content, you cannot use 5G and the content is not available. For instance, take 3D—after Avatar there hasn’t been any 3D content. So why do you need a 3D TV for? Even 4G content is very limited in India. So this year there isn’t any plan for 5G.

Is the focus more on the physical distribution network or the digital? Where do you see growth coming from—big cities or smaller towns?

We cannot change the market, we follow the market. But we have to identify the market earlier than our competition to pre-occupy it. Today, I see more growth in tier 2 and tier 3 cities. The Indian government is investing there—be it in electrification, infrastructure, etc. So we will focus on these cities comparatively more. We will focus on metro cities with premium. Channel-wise, online is gaining share but we also have to protect our offline partners. We are now setting up a so-called channel strategy on how to take care of both.

Which segments contribute most to revenue?

In terms of market, mobile is the biggest segment, followed by TV, refrigerators, washing machines, and air conditioning. Our revenue contribution is not the same as that. For the time being, we don’t do substantial marketing activity in mobile because the market is huge but the competition is very tough. We are preparing to re-enter the mobile market with a product, which is differentiated. And how do we make our own unique product? It will be based on consumer insight. With just a simple phone you cannot compete. There are so many Chinese brands that are coming to the Indian market very aggressively.

Could you talk about smart homes in India?

In India, I am proposing semi-smart homes, not full-fledged ones. Smart home means everything is on a grid—energy, waste management, everything; it’s full-scale. As far as infrastructure is not ready, we cannot do that.

What is your strategy for the next five years?

Instead of competing on just cost and price, we would like to offer a high-value proposition based on consumer insights and our technology. Health-conscious functions and energy savings are the main directions for our new developments. Any technology to accommodate these two, we will continue to work on.

Could you also talk about the challenges of operating in India?

Consumers I cannot change; I have to follow what they want. But the government or other organisations that have authority to approve regulations, they have improved a lot; but speed is a problem. We might comply with everything but there are delays. In terms of mobile phones, the Indian government offers very special spots but not for others. That’s why they [some electronics companies] are shifting other units to countries like Vietnam.

Where does LG see India in the global scheme of things?

Korea, America, and Brazil—up there with them.

This interview appeared in the March issue of the magazine.