Faster Cash Payments for Second-Tier Suppliers... LG Signs Win-Win Agreement with 1st to 3rd Tier Partners

Active Expansion of Win-Win Payments to Second-Tier and Lower-Tier Suppliers
Free Support for Suppliers Including Technical Training and Research Infrastructure

LG has rolled up its sleeves to expand its win-win cooperation, which had previously focused on large corporations and first-tier suppliers, to include second-tier and lower-tier suppliers.

Aerial view of LG Twin Towers in Yeouido, Seoul. LG

On July 6, LG announced that it had held the "LG-1st, 2nd, and 3rd Tier Suppliers Win-Win Cooperation Agreement Ceremony" at LG Science Park in Magok, Seoul. The event was attended by Fair Trade Commission Chairman Joo Byungki, LG Electronics President Ryu Jaechul, LG Display President Chung Cheoldong, LG Innotek President Moon Hyuksu, LG Chem President Kim Dongchun, LG Energy Solution President Kim Dongmyung, LG Household & Health Care President Lee Sunjoo, LG Uplus President Hong Beomsik, as well as Ha Beomjong, Head of Management Support at LG Corp. (President), representatives and employees of partner companies, totaling around 170 participants.

The participants discussed specific measures to improve payment terms for second-tier and lower-tier suppliers, focusing on the win-win payment system, and to expand financial and welfare support. First-tier suppliers have been able to receive cash payments within an average of 10 days through the win-win payment system with large corporations. However, for second-tier and lower-tier suppliers, this culture has not been as active, resulting in payment delays of up to more than 100 days or damages from non-payment, leading to a widening gap. In response, LG announced it would maintain a 100% cash-equivalent payment ratio for first-tier suppliers and would expand the "win-win payment trickle-down rate"—the percentage of payments made by large corporations to first-tier suppliers that are passed on to second-tier and lower-tier suppliers—to at least 10%, the highest among business groups in Korea.

Through this agreement, about 1,300 suppliers (first and second-tier) within LG’s supply chain are expected to benefit. Last year, the seven LG affiliates paid roughly 13.5 trillion won to first-tier suppliers via the win-win payment system. If a similar scale is paid out this year, about 1.3 trillion won is expected to be delivered to second-tier suppliers based on the creditworthiness of LG affiliates. Mirae Korea, a first-tier supplier to LG Electronics, presented a best practice case at the event, sharing that it had passed on the entire 34.2 billion won in supply payments it received over three years from 2023 to 2025 to 15 second-tier suppliers through the win-win payment system without using promissory notes.

Measures to address financial and welfare blind spots were also proposed. To expand support for second-tier and lower-tier suppliers, LG will allocate at least 10% of its 900 billion won win-win cooperation fund to these suppliers. LG will also open its "exclusive welfare mall for supplier employees," operated in the same way as for LG affiliates, to suppliers with relatively weaker employee benefits.

Additional topics discussed included strengthening the foundation for fair trade through measures such as the supply payment price linkage system and the subcontract payment dispute mediation body. As an outstanding example of the supply payment price linkage system, LG Household & Health Care was introduced for creating an environment in which suppliers can "naturally" and "routinely" request price linkage conditions, by integrating the linkage process into its in-house electronic contract system.

LG is also supporting suppliers in their technological competitiveness, beyond just financial assistance. LG Electronics has provided more than 250 suppliers with customized support since 2019 through its "win-win smart factory support program" for digital transformation (DX). LG Display offers free, practical training to suppliers with relatively limited education and training infrastructure and supports their technological capabilities through joint research and patent application programs.

Since 2023, LG Innotek has provided on-site training through its "Supplier Capability Enhancement Training Center," including AI response capability enhancement, transfer of production technology know-how, and expert staff dispatch. LG Chem also offers free various analysis and testing courses at its Technology Research Institute and CS Campus, and supports suppliers with technical (personnel) assistance and technical seminars for technology/product development, aiming for joint technological advancement. LG Uplus covers the full cost of expert consulting for acquiring various certifications needed for SME management activities, such as ISO and Innobiz certifications, to help strengthen the competitiveness of small and medium-sized suppliers.

Chairman Joo stated, "The competitiveness and sustainable growth of large corporations are completed on the foundation of a healthy industrial ecosystem that grows together with partner companies," and added, "I hope the warm culture of win-win cooperation, starting with LG and spreading evenly to first, second, and third-tier suppliers, will take deep root."

President Ha said, "Through this win-win cooperation agreement, we will promote the spread of win-win payments, expand support for second-tier and lower-tier suppliers, and strengthen the foundation for fair trade. At the same time, we will also work to expand the scope of win-win cooperation to include not just business partners, but also the local community and youth."

This content was produced with the assistance of AI translation services.