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LG Abandons CRT TV Business in Europe
Oct 31, 2005
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LG Electronics, South Korean maker of products from refrigerators to cell phones, said it had almost completely stopped selling tube TVs in the European market as it bets the future on thin televisions. The firm is currently selling its remaining stock. In the future, it will restrict itself to the top end of the market for cathode ray tube (CRT) TVs, such as a new range of ultra-slim CRT TVs built with thinner glass tubes, LG Electronics' European chief James Kim told Reuters.

LG's main supplier of glass tubes, LG Philips Displays, could not immediately specify the consequences for its two remaining production sites in France and the Czech Republic, but the 50:50 joint venture LG has with Philips Electronics is preparing another restructuring because of falling demand. "The market is much weaker than we estimated earlier this year. We cannot avoid more restructuring to bring capacity in line with lower demand," a spokesman said.

Market researchers estimate that demand for CRT TVs in Europe will drop around 20 percent this year, more than twice the decline that LG Electronics forecast at the beginning of the year, as consumers switch their preferences to liquid crystal display and plasma screen TVs. "By the fourth quarter, CRT TVs will still be 73 percent of the volume of the TV market but less than half of the value," said analyst Bob Raikes at Britain-based market researcher Meko.

The biggest reason for the market decline is that retailers are not interested in tube TVs, except for the very basic and cheap models that do not take up much shop floor space. "There's no premium market left for CRT. It's all about cost," Raikes said. LG's move to abandon the CRT market is part of its strategy to focus on premium, higher-priced products in mobile phones, TVs, refrigerators, and washing machines in an attempt to boost its ranking from fourth or fifth biggest in the European market to second or third.

Unlike Europe's top consumer electronics maker Philips, LG is still investing in its own production facilities. LG is in talks to open a second plant in Poland that will employ up to 3,000 staff and may involve U.S. $100 million of investments.

If discussions with Polish authorities are concluded successfully, the plant where LG plans to assemble 3.5 million flat-screen televisions and 500,000 refrigerators every year will be based near the university town of Wroclaw.

LG Electronics earlier this month started production at a new TV and monitors plant in the Polish town of Mlawa, but LG expects demand to rise so fast that it will need to expand capacity. (Reuters)

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