Samsung, LG Differ From Hyundai In Handling Russian Appliance Plants
Although Russian domestic factories have been closed for more than a year due to the war in Ukraine, Samsung Electronics and LG Electronics have not yet decided to sell. Instead, they plan to cut their losses by leasing these facilities to local businesses.
According to industry sources on January 29, Samsung Electronics and LG Electronics are considering leasing equipment factories in Russia to local companies.
"Samsung Electronics" has a factory in the Kaluga region near Moscow, which mainly produces televisions. According to information, the company is negotiating with Russian home appliance distributor VVP Group to lease a TV production line at the Kaluga factory.
LG Electronics, which makes televisions, washing machines and refrigerators in the Luzh region near Moscow, is leasing with Russian electronics distributor DNS.
The Russian factories of both companies were closed after the war in Ukraine due to problems with the supply of local parts. Samsung Electronics ceased operations in March 2022, and LG Electronics in August of the same year. Next March, Samsung's factory will be in operation for two years, and LG's for about 18 months.
Unlike Hyundai Motor, which recently sold its Russian factory to Volkswagen's Russian subsidiary with a two-year buyback clause, Samsung and LG are hiring.
This decision is influenced by the size of the Russian market. Russia's technology market was worth about $11.12 billion last year and is expected to reach $13.18 billion by 2029, according to marketing firm Mordor Intelligence.
Russian factories serve as a production base to meet Eastern European demand located in Western Russia for better access to Eastern European countries. Europe is the second largest market in terms of sales for Samsung Electronics and the third largest for LG Electronics.
The difficulty in obtaining a fair value for these plants at the time of sale also leads to the preference for leasing. Hyundai Motor has sold the Russian plant it built with an investment of 540 billion won ($406 million) for 10,000 rubles ($112.00). Samsung Electronics spent 54 million dollars to build a TV factory in Russia, and LG Electronics won 800 billion.
