Getting Religion

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The growth has brought LG to the cusp of greatness, but not quite into the industry's aristocracy. Still missing is the global brand name crucial for commanding high premiums and outpacing low-cost manufacturers in China. It's an accomplishment hardly any Asian corporations have managed to achieve. "We've had success at the foothills," says Woo Nam Kyun, president of LG's digital-TV operation. "Now we have to climb the mountain."

The climb LG has chosen is Mount U.S.A. This year LG is making its biggest thrust ever into the U.S. market, with a $100 million budget for advertising alone. Last year LG spent $10 million refurbishing a billboard in New York City's Times Square into a giant flat-screen TV, and it helped renovate a Los Angeles concert hall. LG is also buffing up its U.S. product line. Last July, LG began introducing its first LG-branded flat lcd and plasma TVs in the U.S., and next year it will launch its first high-definition TVs with built-in hard-disc drives that can record movies. An LG refrigerator with an lcd TV set in the door is already on the market.

LG faces plenty of competition. Its biggest rival at home and abroad, Samsung Electronics, whose revenues of $36.4 billion are two times as large as LG's, has already hit the U.S. — and scored big successes. LG executives hope that competition from Samsung will make their company stronger. "Their presence as a very strong competitor in our neighborhood has always kept us alert and awake," says LG's Woo. "This has helped us compete in overseas markets as well. I can be more successful with Samsung's success."

LG's first crack at the U.S. market ended in disappointment. Beginning in the 1980s, LG sold cheap TVs under the brand Goldstar, after the company's former name, Lucky-Goldstar. In 1995, LG purchased American TV maker Zenith Electronics Corp. and began using that moniker on its products. But four years later, Zenith filed for bankruptcy, a victim of cutthroat competition. To avoid a repeat of that failure, LG was content until recently to supply other companies with appliances that they sell in the U.S. under their own brands.

These days, however, a monumental transition is taking place in U.S. and European living rooms, and LG smells opportunity. Consumers are tossing aside boxy TVs and clunky vcrs in favor of wide, flat screens, dvd players and, eventually, computer-like systems with digitized video and music recorders and Internet services. LG is surprisingly well positioned for this new digital world.

LG has a distinct advantage: its ultrawired South Korean home base. The demanding Korean market, where an amazing 84% of households using the Internet have high-speed access, propels LG to develop more advanced products and provides a testing ground for new technologies. LG has outpaced Nokia and Motorola in cramming the hottest new features into a mobile phone. One of its latest models, the SC8000, which came out in Korea in April, combines a pda, an MP3 player, a digital camera and a camcorder. The advantage is paying off. In May, LG launched a new mobile phone in Korea with a 2-megapixel color screen simultaneously with Samsung. In the past, LG lagged at least several months behind its competitor's phone launches, missing out on higher prices and margins. LG became the largest supplier of mobile phones last year to service provider Verizon Communications.