Samsung Electronics and LG Electronics generate broadly similar revenue from TVs, home appliances and air conditioning. The profits they make from those sales, however, have diverged sharply.

In the second quarter, Samsung’s business involving visual displays and digital appliances posted 14.5 trillion won ($10.5 billion) in revenue, but an operating loss of some 10 billion won.

LG, meanwhile, generated combined revenue of 14.92 trillion won from its sales of home appliances, TVs and heating, ventilation and air conditioning, with operating profit reaching 1.14 trillion won.

A revenue difference of just 416.4 billion won translated into an operating profit gap of roughly 1.15 trillion won.

The divergence widened this year. LG’s three businesses delivered more than 1 trillion won in combined operating profit in both the first and second quarters, with margins of 8 percent and 7.6 percent, respectively. Samsung earned about 200 billion won in the first quarter, before slipping to a modest loss in the second.

The contrast is notable because both companies were in the red just three quarters earlier, each reporting losses of more than 500 billion won from their appliance-related operations in the fourth quarter of last year.

Industry officials attribute the widening gap largely to differences in business mix and the pace at which the two companies have diversified beyond conventional hardware sales.

Both face the same difficult environment: sluggish demand, aggressive pricing by Chinese competitors, rising semiconductor costs and higher logistics and raw material expenses.

Samsung cited increased costs as a key factor behind its second-quarter performance. LG encountered similar pressure, but said a larger contribution from premium products, cost reductions, greater operational efficiency and tariff refunds helped preserve profitability.

LG has also spent several years building businesses that generate revenue beyond one-time product sales, including business-to-business operations, appliance subscriptions and its webOS platform.

“LG has spent several years changing its business structure and building buffers against external shocks,” an industry official said. “That preparation is now becoming visible in its earnings.”

Samsung has traditionally relied more heavily on manufacturing scale and product volume. That model can deliver strong cost competitiveness when demand is robust, but margins can come under pressure when weaker sales and higher costs arrive together.

Samsung is now moving to adjust that structure.

The company has been reviewing the efficiency of its production network and is expected to increase outsourcing for some lower-margin products, including microwave ovens and dishwashers, according to industry officials. Core categories with stronger margins, such as refrigerators and washing machines, are expected to remain largely in-house.

The comparison between the companies is not strictly like-for-like because they report their operations differently. Samsung’s visual display and digital appliance businesses include TVs, appliances, HVAC equipment and medical devices, while LG discloses appliances, TVs and HVAC as separate divisions.

Even so, each of LG’s three major businesses remained profitable in the second quarter. Its appliance division posted operating profit of 685.9 billion won, while its TV and webOS business earned 219.4 billion won and its HVAC division 235.8 billion won.

The earnings gap also matters, as both companies seek growth beyond the mature TV and appliance markets.

LG said orders for artificial intelligence data center cooling solutions exceeded 600 billion won in the first half. It is targeting projects worth several trillion won by year-end, after securing Nvidia certification for some coolant distribution unit models. The company has also begun initial production of robot actuators at a pilot line.

Samsung is moving into the same growth areas. Its acquisition of Germany-based FlaktGroup gives it an established position in large-scale data center cooling, while its robotics organization has been elevated to report directly to the CEO.

Strong semiconductor earnings give Samsung more room to absorb weakness in TVs and appliances while it restructures. But as Chinese competitors continue to pressure prices, the widening gap with LG suggests that scale alone is becoming less decisive in the mature appliance market.

By Jo He-rim (herim@heraldcorp.com)