Press Release

10/14/2005

LG Electronics aims to take world's top spot in System Air Conditioner

- Unveils new environment-friendly products equipped with new refrigerants

- Unveils new environment-friendly products equipped with new refrigerants
- Announced environment-friendly strategy for the Whisen System Air Conditioner and
Growth strategies for system air conditioner geared toward the world's top spot
- President & CEO of Digital Appliance Company Lee Young-ha said,
"Through our environment-friendly management program for system air conditioner,
we aim to become the world's best in systemized air conditioning by 2010,
as we have already seized the No. 1 spot for home system air conditioners."

Seoul, October 13, 2005 --- LG Electronics, the world's top seller of home air conditioners, is moving toward the top spot in the highly value-added market of system air conditioners.

On October 13th, LG Electronics held a session on an Environment-Friendly Strategy for Whisen System Air Conditioner and unveiled new products at its Yeouido LG Twin Towers building.
Attending the session were Executive Vice President Lee Young-ha, President & CEO of Digital Appliance Company, Executive Vice President Nho Hwan yong from Air Conditioner Division and Executive Vice President Kang Simon from Korea Sales & Marketing Operation and others.

LG Electronics announced plans to take the world's top spot in systemized air conditioners through its Whisen system air conditioner by 2010. With USD3.5 billion in sales through environment-friendly management, such as developing environment-friendly refrigerants, making all products highly efficient, and strengthening recycling systems.

President & CEO of Digital Appliance Company Lee Young-ha said, "Due to global warming and environmental pollution, environmental regulations are being strengthened globally, and thus the development of environment-friendly products are emerging as the key issue to the success of corporations."

He added, "Through continuous R&D investments, we will strive to strengthen efforts to develop environment-friendly system air conditioners, expand global production bases, and thus attain the top spot in the world's system air conditioner market by 2010."

::Environmentally-friendly Strategy for Whisen System Air Conditioner

The Climate Change Convention that was signed with the Kyoto Protocol on February 16, 2005, along with rising oil prices has heightened people's interest regarding high-efficiency products. The EU and other advanced nations are now requesting reliable product information on whether products are hazardous or highly efficient, and whether manufacturers are developing environmentally friendly products.

In response to this, LG Electronics announced three environment-friendly strategies for system air conditioner and four tasks of action.

Under the three strategies, LG Electronics will positively respond to environmental regulations according to product stages from design to disposal. The three strategies include: 1.During the design stage, a ban in the use of environment destructive substances. 2. During the usage state, reduction in the generation of CO2 and increase in energy efficiency. 3. During the disposal and recycling stage, strengthening the recycling system.

To this end, LG Electronics will strive to completely ban the use of ozone destructive substances (Freon gas) by 2007, strategically develop alternative energies (geo heat, fuel cells, and others), employ high energy efficient technologies in all products by 2006, and develop networks to promote easy-recycling of products and waste.

::Environment-friendly new products

On October 13, LG Electronics, as a first step toward its environment-friendly strategies, unveiled its new 'MPS environment-friendly inverter system and the Whisen air conditioner 'Multi V Super', and 'LG clean ventilation system.'

The environment-friendly 'MPS (Multi Power System) inverter system, the first of its kind in Korea, employs environment-friendly new refrigerant 'R-410A' that does not destroy the ozone layer. This system has three compressors unlike one compressor in conventional systems so as to automatically adjust the number of compressors in operation according to required capacity, thus boosting the energy saving effect.

Multi V Super, employing the environment-friendly new refrigerant R-410A, provides a cooling efficiency of up to 46 horse power, covering about 1,050 ~ 1,150 m2. This is the world's largest cooling and heating system and is superior in energy efficiency.

The LG environment-friendly clean ventilation system allows for four-season ventilation and air cleaning functions. The relevant market for the product is rapidly increasing in accordance with Indoor Air Quality Management Laws that took effect in January, 2006, and the implementation of the Housing Performance Grade Marking System.

::Three growth strategies for system air conditioner geared toward the world's top spot

Together with its environment-friendly strategies, LG Electronics announced three growth strategies for system air conditioner such as exploring the blue ocean market, continuing R&D investment and developing global production bases, and strengthening the expertise of system air conditioner.

:: Explore the Blue Ocean Market
LG Electronics will focus on system air conditioner, increase sales in highly value-added large-capacity commercial air conditioners, and interconnect the new market of ventilation systems with system air conditioner to create the Blue Ocean.

:: Continuing R&D investments and develop global production bases
The company plans to increase the R&D manpower from the current 1,100 people to 2,000 people by 2008 and continue R&D investments at a cost of 10% of sales.

Also, the company will expand air conditioner system production capacity at its Changwon Plant, and in the long term, build air conditioner production lines in Turkey, China, India, and Brazil to strengthen market accessibility.

:: Strengthening experts in system air conditioner globally
The company plans to triple the number of air conditioner academies globally from its current level of 29 by 2010. The academies are designed to train experts in air conditioner marketing, as well as installation and services.

LG Electronics estimates the air conditioner system market to expand from the current USD 21.2 billion to USD 29 billion by 2010, and will reap USD 3.5 billion in air conditioner system sales by 2010 to seize the world's top place. The company has already taken the world's No. 1 spot in room air conditioners.

1. About System Air Conditioners

One outdoor unit connects with several indoor equipment units for optimization according to the types of buildings and characteristics of the rooms. It is dubbed a next-generation air conditioning system.
Unlike the room air conditioner, the system air conditioner requires the installation of related plumbing systems in new buildings and remodelled buildings, and this work should be considered even during the construction/design stage. The maximum demand for electrical power can be controlled individually or centrally.

2. System Air Conditioner Market Size
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'04 '05 '06 '10
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Global USD20 bn USD21.2 bn USD23.3 bn USD29 bn
Korea 400 bn won 730 bn won 830 bn won 1.7 trillion won
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3. LG Electronics System Air Conditioner Sales Target
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'04 '05 '06 '10
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Global USD640 mil USD1.2 bn USD1.8 bn USD3.5 bn
Korea 250 bn won 400 bn won 500 bn won 1 trillion won
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4. Ventilation System: It allows for filtering and inflow of external clean air and channels internal air outside. It is not a heating/cooling system, but is a system that consists of ventilation units that is made of related supplementary materials.

5. LG Electronics' Environment-friendly Strategy Diagram for System Air Conditioner
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