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Press Release

10/17/2006

LG ELECTRONICS REPORTS THIRD QUARTER 2006 EARNINGS RESULTS

LG Electronics (LG), a leader in consumer electronics and mobile communications, announced unaudited earnings results of the three month period ended September 30, 2006. Amount in Korean Won (KRW) are translated into US dollars (USD) at the average rate of three month period in each quarter, which was KRW 955 per US dollar (2006 3Q), KRW 950 per US dollar (2006. 2Q, QoQ), KRW 1,029 per US dollar (2005. 3Q, YoY).

LG Electronics (LG), a leader in consumer electronics and mobile communications, announced unaudited earnings results of the three month period ended September 30, 2006. Amount in Korean Won (KRW) are translated into US dollars (USD) at the average rate of three month period in each quarter, which was KRW 955 per US dollar (2006 3Q), KRW 950 per US dollar (2006. 2Q, QoQ), KRW 1,029 per US dollar (2005. 3Q, YoY).

Sales and Profit

Sales in the third quarter of 2006 jumped 4.5 % to KRW 6.054 trillion (USD 6.34 billion) from KRW 5.796 trillion (USD 6.099 billion) a quarter earlier and 0.6% from KRW 6.018 trillion (USD 5.848 billion) from the previous year. Operating profit recorded KRW 197.2 billion (USD 206.5 million), increased 3.5% quarter on quarter and Mobile Communications and Digital Display Company led recurring profit and net profit to turn-around, booking gains of KRW 30.5 billion (USD 31.9 million) and KRW 22.7 billion (USD 23.7 million) despite an equity method loss from LG.Philips LCD.

Strong sales of plasma panels and plasma and LCD digital TV business led a 18.9% jump QoQ in sales of Digital Display business, and sales in Mobile Communications showed QoQ increase of 4.7% and 5.3% from the handset business, thanks to strong performance in open markets and robust Chocolate phone sales in North America. Exports recorded KRW 4.52 trillion (USD 4.74 billion), amounting to 75% of total sales.

Mobile Communication Company recorded sales of KRW 2.297 trillion (USD 2.41 billion), 4.7% higher QoQ and 9.7% decrease YoY, and operating profit of KRW 98 billion (USD 102 million), a 370% increase from KRW 21 billion (USD 22 million) QoQ and 23% decrease from KRW 128 billion (USD 124 million) YoY.

From the handsets business only, revenue rose 5.3% to KRW 2.126 trillion (USD 2.23 billion) from KRW 2.019 trillion (USD 2.125 billion) QoQ. Operating profit recorded KRW 79 billion (USD 82 million), 3.7% of total revenue and turn-around from loss of KRW 3.0 billion (USD 3.15 million) in the previous quarter. Total shipments were 16.5 million units (10.5 million in CDMA, 5.6 million in GSM, 0.5 million in WCDMA), an 8% increase from the previous quarter of 15.3 million units and 7% increase YoY. Improved shipment in CMDA market to 10.5 million units from 9.1 million units was driven by strong performance in North America geared by Chocolate phones and Korea. Boosts in open markets drove growth in GSM area to 5.6 million units from 4.8 million units. In sales by region, rise in North America of 45% from 28 % the previous quarter was remarkable.

Digital Display Company sales jumped 18.9% QoQ and 28.8% YoY to KRW 1.699 trillion (USD 1.78 billion) with seasonal display. Performance of plasma and LCD digital TV business rose 50% QoQ based on shipments. Sales of plasma panels rose 26% QoQ with the portion of high definition rising to 70% exceeded industry average of 66%. The Company's operating profit expanded to KRW 42.6 billion (USD 44.6 million) with increase 104.8% QoQ and 54.3% YoY, primarily due to improvement in product mix to large size digital TVs and cost reduction efforts.

Sales from Digital Media Company increased 2.6% QoQ to KRW 658 billion (USD 689 million). The business unit achieved this rise in sales despite a decline in average selling price of IT products.

Digital Appliance Company sales rose 4.6% to KRW 1.39 trillion (USD 1.45 billion) YoY, but declined 11.3% QoQ primarily due to increase in raw material cost and seasonally weak season. Sales in Korean market recorded a 12.8% increase YoY thanks to performance from premium products such as three-door refrigerators, and steam drum-type washing machines. In air conditioners, increase in cost of copper, one of the key raw materials caused a decline in profit YoY, despite an increase in sales.

Non-operating Items

Recurring profit stood at KRW 30.5 billion (USD 31.9 million) a decrease from operating profit of KRW 197.2 billion (USD 206.5 million), primarily due to equity method loss of KRW 109 billion (USD 114 million) from LG.Philips LCD.

Consolidated and Global Financial Structure

Sales on a consolidated basis slightly increased to KRW 11.37 trillion (USD 11.91 billion) from KRW 11.26 trillion (USD 11.85 billion) in the previous quarter and from KRW 11.36 trillion (USD 11.04) YoY. However, profitability recorded loss due to an adverse performance of LG.Philips LCD. Global sales decreased 0.04% to KRW 8.87 trillion (USD 9.29 billion) from KRW 9.26 trillion but showed increase 0.01% from KRW 8.78 trillion (USD 8.53 billion) YoY.

Fourth quarter 2006 Outlook

In the fourth quarter 2006, LG Electronics anticipates sales of KRW 5.3 to 5.5 trillion (USD N/A), driven by continuous growth in premium product line-ups.

Sales in Digital Appliance business are expected to continue growth by expanding premium appliance products such as side-by-side refrigerators, steam drum-type washing machines and light-wave ovens, particularly in North America.

In handset business, "black label" chocolate phone series and follow-up CDMA and GSM phones in Korea and overseas open markets will be the key for further successes; however, competitive pressures in WCDMA market are not seen to be lessened.

Strong seasonal demands will lead sustainable growth in plasma and LCD digital TVs over 42 inches and overall IT products such as premium products in audio-video, notebook PCs and digital storages including 18x DVD-W, and will support steady rise in Digital Media business. However, average selling price decline will continue.

Sales and profits by division and financial statements are attached for more detailed information.

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