LG Electronics has partnered Saudi company H G Ibrahim Shaker to manufacture air conditioners near Riyadh.
The new plant, the latest air conditioner production facility in Saudi Arabia, is being constructed in Al Tatweer Industrial City, south of Saudi Arabia’s capital city Riyadh. It is expected to start operating in Q4 2007 with an annual production capacity of 250,000 units.
The groundbreaking ceremony for the venture, LG-Shaker Air-Conditioning Company, was held recently in the presence of dignitaries including Young-Ju Kim, Korea’s Minister of Commerce, Industry and Energy, and Hashem A Yamani, Saudi Minister of Commerce and Industry. Also attending were Hussein Shaker, president of H G Ibrahim Shaker, H Y Nho, president of LG Electronics’ air-conditioning division, and K W Kim, president of LG Electronics’ Middle East & Africa region operations.
“Saudi Arabia is the biggest market in the Middle East,” said Nho. “LG will build a complete local business system from the ground up, from product development to sales. We plan to further strengthen our global network of air conditioning businesses and solidify our competitiveness in air conditioning markets by utilising all regional production facilities, including this plant.”
LG holds a 49 per cent stake in LG-Shaker, while HG Ibrahim Shaker, which is the biggest home appliances distribution company in Saudi Arabia, holds the remainder stake. The joint venture will invest $35 million in two phases within five years: an initial investment of $15 million followed by an additional $20 million investment by 2011 to double production capacity to 500,000 units.
The Saudi Arabian air conditioner market is growing at an average rate of 7 per cent annually; the market size was $693 million last year, and is expected to reach $748 million in 2007. The market size is further expected to grow to approximately $1.01 billion in 2011.
LG claims that last year it had the largest air conditioner market share in Saudi Arabia with 22 per cent, and the company looks to grab 25 per cent of the market in 2007. By 2011, LG expects to solidify its position in Saudi Arabia with a 34 per cent market share.
LG has been the top provider of air conditioners globally for seven consecutive years, and has sold more than 10 million units in the global market every year since 2004. According to a recent report from Fuji-Keizai, a Japanese market research firm, LG recorded total sales of more than 12 million units in 2006, comprising about 19.5 per cent of the world’s air conditioner market share.
LG currently operates air conditioner plants in eight countries serving all major home appliance markets around the world. Production sites in Turkey, Poland and India supply products to the European and African markets; a plant in Brazil provides for the North and South American region; and plants in Thailand and Vietnam serve the Asean Free Trade Area (AFTA).
Additionally, LG’s Korean plant functions as its air conditioning technology global R&D centre, while the plant in China focuses on the domestic market and exports. The new air conditioner plant in Saudi Arabia will be LG’s ninth air conditioner production facility worldwide.
