LG, a home appliance giant from South Korea is about to close its manufacturing site in the Moscow region. The company is thinking about moving its business to Uzbekistan or Kazakhstan, according to the Russian business newspaper Kommersant.
The Korean company has already negotiated with Artel, an Uzbek company that closely cooperates with another South Korean tech giant Samsung. LG used to run its plant in Kazakhstan but closed it several years ago.
As Artel told the Kommersant edition, there are no joint projects between Artel and LG. The company has also refused to comment on possible negotiations with Koreans. A person in Kazakhstan’s government familiar with the issue said that the country’s Ministry of Digital Development, Innovations and Aerospace Industry is currently negotiating with a South Korean company about opening a new plant in Kazakhstan. Both the global and CIS regional headquarters of LG declined to comment on this.
The current business in Russia isn’t doing well for LG. Over the first eight months of 2022, the company’s sales of fridges and TV sets plunged 10% and 7.8% respectively. They are still in decline.
«There are 80 companies in Uzbekistan which cooperate with Korean companies. Because of the politics by the Soviet authorities, there are 200,000 ethnic Koreans in the country, that’s why business and other ties between the two countries are strong,» said Leonid Delitsyn, an analyst from Finam.
He also noted that the transfer of production to Uzbekistan might be justified by cheap labor there. On the other hand, there are more consumers with cash in neighboring Kazakhstan, the expert highlighted.
According to Alexey Pogudalov, head of the business in Holodilnik.ru, there is no room for new production in Uzbekistan as local companies are running out of capacity. Moreover, the domestic demand isn’t so big.
The expert noted that the LG factory in the Moscow region was aimed primarily at the Russian market, which is quite big.
Another unidentified source in Kazakhstan says that Artel isn’t so enthusiastic about cooperating with LG because the company doesn’t want to facilitate the business of a potential competitor.
In early September, another tech giant Huawei relocated part of its staff from Russia to Kazakhstan and Uzbekistan, including those managers and heads of departments, who are Chinese citizens.