LG Electronics (LG) of Korea, one of the world’s top air-conditioner manufacturers and a leader in consumer electronics and mobile communications, recently announced the signing of a contract with H G Ibrahim Shaker Company Limited – the company’s Saudi Arabian partner – to establish the LG-Shaker Air Conditioning Company joint venture in Riyadh.

LG’s market share in Saudi Arabia was 19 per cent last year and is aiming for 22 per cent this year and 30 per cent by 2011, consolidating its number one position in the domestic AC market.
A key part of the global strategy for LG is the establishment of a new plant in Riyadh to serve the increasing requirements of Saudi Arabia and the wider region. The strategic importance of the joint venture with the Shaker Group of Companies included the signing by owners Hassan G Shaker, chairman and chief executive officer and Hussain G Shaker, president. The Shaker Group dates back to 1950 when it launched home air-conditioning and home appliances into Saudi Arabia.
H G Ibrahim Shaker Company, as a sister company of Ibrahim Shaker Company, started its activities by acquiring LG air-conditioning product lines in 1994 when it became its exclusive distributor. Today, the company says it has the number one position in the kingdom for room air-conditioning systems.
The importance of the JV agreement was also underlined by the key attendance of  Amr Dabbagh, governor of the Saudi Arabian General Investment Authority (Sagia) and other assembled dignitaries at the official signing ceremony held in Riyadh last month.
The joint venture represents an investment of SR112.5 million ($30 million) with construction scheduled over two phases within five years. The first phase investment of SR75 million will begin during the first two years with H G  Ibrahim Shaker Company holding 51 per cent and LG Electronics 49 per cent stakes.
The new production facility is being constructed on Riyadh's Second Industrial City with the plant set to open in the first half of 2007. The plant is expected to have a production capacity of 250,000 units by 2008, which is expected to reach 750,000 units over five years.
According to Hwan Yong Nho, executive vice president of LG Electronics' Air Conditioning Division, Saudi Arabia is the biggest market in the Middle East and LG will be building a complete business platform from facilities planning through to product development, marketing and sales. Leveraging from the strong brand image of LG, its entry into commercial production in Saudi Arabia is very important, bringing a faster response to the market in terms of delivery through localised manufacturing, further enhanced by appropriate technology transfer and skill training for the workforce, says a company spokesman.
Feasibility studies for the new plant have been ongoing over the past year and the decision-making has been fast by any standards in establishing the JV, according to Nho.
“We plan to further strengthen our global network of air-conditioning businesses by utilising all regional production facilities including the plant that will be built in Saudi Arabia.  The construction of this new production facility in Saudi Arabia will be the eighth LG air-conditioner production facility in local markets around the world," says Nho.
LG currently operates air-conditioner plants in Korea, China, Thailand, India, Turkey, Brazil, Vietnam and a facility is under construction in Iran as a technical alliance. With the eighth plant in Saudi Arabia added to the global network, LG plans to secure its market leadership in the air-conditioning business.
LG Electronics plans to utilise the new facility as a strategic platform to move forward across the GCC and the wider region by developing localised products at competitive prices and by applying the comparative costs advantages and geographical proximity to customers offered by the new plant.
LG-Shaker Air conditioning Company is focusing on training of Saudis, both university and technical school graduates, with on-the-job experience at the factory as well as through special seconded training at the LG Air Conditioning factory in Korea.
According to industry analysts, the Saudi Arabian air-conditioner market is increasing at an average annual rate of 7 per cent. The estimated size of the market was $ 400 million last year and is expected to grow to $450 million this year. According to Nho, the market size is expected further increase to approximately $700 million by 2011.
H G Ibrahim Shaker, the exclusive distributor of LG air-conditioners, is the biggest partner of LG’s business activities in Saudi Arabia.  In the Saudi domestic market, targeted accumulated sales are estimated at $1.4 billion by 2011 starting from the year 2007.
Hussein Shaker, president of H G Ibrahim Shaker Company, emphasised the superb after-sales service and technical support extended by LG to its dealers and end-users through 14 Shaker service centres, a cadre of 250 highly-qualified technicians, 80 mobile service units and 10 authorised service centres.
Nho also announced that a range of new models and special features for LG air conditioners will be introduced in Saudi Arabia market this year. The new plasma models will be equipped with more advanced and sophisticated features.
“We will be bringing the advanced technology of a ‘11-stage Neo Plasma plus filter' ensuring optimum sterilisation and decomposition of bacteria, thereby enhancing a healthier and cleaner performing unit and environment,” adds Nho.
The new high-capacity convertible line-up will be introduced with capacities ranging from 36,000 to 60,000 BTU. In addition, the LG Gold window-type air conditioner will have the ‘Nano Gold Filter’.
LGE was established in 1958 as the pioneer in the Korean consumer electronics market and has since become a global force in electronics, information and communications products.  In 2004 LGE recorded consolidated annual sales of $38 billion employing more than 66,000 employees working in 76 subsidiaries in 39 countries.
In 2005, LGE achieved global sales volumes of 10 million units for the second year and retained number one position for the sixth consecutive year. LGE’s three key strategies include environmentally-friendly manufacturing; maximising synergy between global production bases; and business restructuring for sustainable growth.