LG Twin Towers in Yeouido, Yeongdeungpo-gu, Seoul. Photo courtesy of LG
LG (003550) is strengthening win-win support for its second- and third-tier suppliers, moving beyond first-tier partners to back the government’s shared-growth strategy between large corporations and small and medium-sized enterprises.
LG said it held the “LG Tier 1, 2 and 3 Supplier Win-Win Cooperation Pact Signing Ceremony” at LG Science Park in Gangseo-gu, Seoul, on Thursday. About 170 people attended, including Fair Trade Commission Chairman Joo Byung-ki; the chief executives of seven affiliates — LG Electronics (066570) President Ryu Jae-cheol, LG Display (034220) President Chung Cheol-dong, LG Innotek (011070) President Moon Hyuk-soo, LG Chem (051910) President Kim Dong-chun, LG Energy Solution (373220) President Kim Dong-myung, LG H&H (051900) President Lee Sun-joo, and LG Uplus (032640) President Hong Beom-sik; along with Ha Beom-jong, president of LG’s management support division, and supplier representatives.
Through the pact, LG will expand its “win-win payment trickle-down rate” to more than 10 percent, the highest among Korean companies. Win-win payment is a system that allows a large company’s suppliers to receive transaction payments more quickly and securely. The trickle-down rate refers to the proportion of payments made by a large company to first-tier suppliers through win-win payment that flows down to second-tier and lower suppliers.
Currently, first-tier suppliers can receive cash payments within an average of 10 days through win-win payment, but second-tier and lower suppliers do not properly enjoy this benefit. Some suffer from delays of up to 100 days before receiving payment, or fail to receive payment at all. LG plans to address this problem by ensuring that win-win payment funds flow through first-tier suppliers to second-tier and lower suppliers.
LG also decided to use more than 10 percent of its 900 billion won shared-growth fund to support second-tier and lower suppliers. It plans to open the “supplier employee welfare mall,” operated in the same way as those for LG affiliates, to second-tier and lower suppliers to help improve their employee benefits. Measures to strengthen fair-trade-based systems, such as the supply payment linkage system and a subcontracting payment dispute mediation body, were also discussed.
LG also plans to continue strengthening its existing win-win activities. LG Electronics has supported the digital transformation (DX) of about 250 suppliers through its “win-win smart factory support program.” It is also contributing to revitalizing the regional economy by investing about 50 billion won — the first among regional universities nationwide with Changwon National University — to build a 13,000-square-meter heating, ventilation and air conditioning (HVAC) research center. LG Display provides practice-oriented training free of charge and operates joint research and development and joint patent application programs. Since 2023, LG Innotek has provided field-oriented hands-on training through its “supplier capability enhancement training center,” including strengthening AI-response capabilities, transferring production technology know-how and dispatching specialized personnel.
LG expects that more than 1,300 suppliers will benefit from this win-win pact. “We will pursue the expansion of win-win payment, expanded support for second-tier and lower suppliers, and strengthened fair-trade foundations, while also striving to expand the scope of win-win cooperation beyond relationships between trading companies to local communities and young people,” President Ha said.
Chairman Joo said, “The competitiveness and sustainable growth of large corporations are also completed on a healthy industrial ecosystem that grows together with suppliers.” He added, “I hope that a warm culture of win-win cooperation, spreading evenly from LG to first-, second- and third-tier suppliers, can take deep root.”