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War in Ukraine Halts Samsung and LG’s Business, Chinese Companies Sweep In

Daniel Kim Views  

The lease negotiations for Russian home appliance factories, pursued by Samsung Electronics and LG Electronics since the beginning of this year, have essentially fallen through. With no promising lease candidates appearing so far, the local businesses halted due to the impact of the Russia-Ukraine conflict and fell into limbo.

Samsung Electronics had been negotiating a factory lease in Kaluga with several companies, including the Russian appliance distributor VVT Group, since the beginning of the year, but these negotiations have failed. LG Electronics also discussed leasing a factory in Ruzay with the local electronics distributor DNS, but no significant conclusions were reached.

Samsung Electronics ceased operations at the Kaluga factory in March 2022, and LG Electronics halted operations at the Luza factory in August of the same year. Both companies have withdrawn from local production for over two years, negatively affecting their businesses in Russia and the surrounding Central Asian region. There have been no promising lease candidates, and the international political climate remains unclear, making it difficult to establish concrete plans.

Since Samsung and LG halted their local operations in Russia, Chinese companies have quickly filled the void in the local appliance market. Chinese appliance companies, struggling with a domestic market slump, are turning their attention to overseas markets, with a strong focus on Russia.

Due to these factors, Russia is concerned about the aggressive push of Chinese companies. The fear is interpreted as a wariness of becoming too dependent on a specific country.

A local industry insider said, “The Russian government is concerned about Chinese appliance companies quickly dominating the market and wants Samsung and LG to either restart their factories or speed up lease negotiations. However, from the companies’ perspective, they are caught in a difficult situation.”

An LG Electronics spokesperson said, “We are considering various possibilities related to the operation of the Russian factory.”

In May, the Russian daily Kommersant reported that, according to local online appliance distributor Holodilnik’s statistics, China’s Haier recorded the highest sales (19%). In second place was the Italian brand Candy (13%), which Haier acquired. The Turkish brands Indesit and Beko followed with 12% and 11%, respectively.

Meanwhile, according to the Russian media outlet Vedemosti, 1,503 foreign companies had withdrawn from Russia as of the end of last year. Of these, 942 companies ceased operations, and 666 scaled down their operations.

Daniel Kim
content@viewusglobal.com

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