LG, yes the same LG whose logo may be stamped somewhere on your HDTV, fridge or cell phone, has just announced it’s entering the water treatment business. It’s for the good of people, and for LG’s bottom line.
LG’s press release on the matter puts an altruistic spin on things. LG’s trying “to help combat global water supply issues and to move further toward becoming a more environmentally sustainable business.” CEO of the Home Appliance division Young-ha Lee even trotted out some harsh stats: “Water affects every aspect of our lives, yet almost one billion people around the world don’t have clean drinking water.” That’s about one in six on the planet, which is indeed a terrible thing. LG’s even pouring “more than” $400 million in investments over the next 10 years to build up its new water treatment business, which does seem to demonstrate that it’s putting its money where its mouth is.
The money will go toward R&D and tactical acquisitions and talent hiring, all with the aim of boosting membrane filtration techniques for rapid, efficient, and cheap water filtration. LG’s research facilities, teams of engineers and scientists and any new specialists it hires/acquires can almost certainly help: Such a big name pouring a sizable chunk of cash into an endeavor like this is a fantastic sign for the poorer people of the world.
But LG is, ultimately, a business. And the real motivation behind this slightly surprising move is money. LG’s hoping to become a “top 10 global water treatment company” that generates $7 billion in revenue by 2020–quite an astonishing return on capital investment, you might notice.
It’s a hot topic, looks eco-friendly and suitable green for LG’s PR people to use cleverly, will appease the more eco-conscious among LG’s shareholders and it’s fairly low-hanging fruit since the tech challenges in water purification aren’t up there in difficulty with improving the efficiency of solar electric panels. It’s also a potentially stable business, since people will always live in places or conditions where impure water is all they have, and this need a means to purify it. This stability will help insulate LG’s top line from bumps and slips in the volatile high-tech industries its much better known for.
LG can also be accused of pulling a GE-like maneuver here. The giant high tech firm has been dabbling in the water industry for years–in 2005 it was investing just $700 million in clean water R&D, but this year it’s more than doubled the figure to over $1.5 billion to help people meet “pressing energy and water challenges.” In 2007 it forked over enough cash to buy French firm Idex Aquaservices, a company that sold tech that extracts and treats water to levels suitable for industrial purposes. This shows that GE too is interested in acquiring both clean water tech and expertise by acquisition. In 2009 GE co-invested in a $1 billion project to pipe fresh water to Jordan–assuring itself a share in the ongoing revenues this enterprise will generate, and thus demonstrating the way LG may also expand its water plans in the future.