As artificial intelligence (AI) technology reshapes the industrial landscape, the 'cooling solution' that cools the heat of data centers, which are the foundation of AI, is emerging as a key supporting industry. In this trend, LG Electronics has been selected as the cooling solution supplier for the AI data center of Saudi Arabia's mega-future city project 'NEOM City,' emerging as a new powerhouse in the global market.

This signifies more than just winning a contract; it signals that LG Electronics has positioned itself as a key player in the infrastructure competition of the AI era.

In September this year, LG Electronics signed a Memorandum of Understanding (MOU) with Saudi data infrastructure company Data Vault, electronics distribution company Shaker Group, and power company ACWA Power to supply cooling solutions for a 1.5GW (gigawatt) AI data center to be established in the advanced industrial complex 'Oxagon' in NEOM City. Cho Joo-wan, CEO and President of LG Electronics, stated, "Visible results are emerging in the export of data center cooling solutions, a supporting industry of AI," and added, "If we supply not only chillers but also comprehensive cooling solutions to the NEOM City project, the business scale will expand to the trillion KRW level." This has led to projections that the goal of achieving KRW 20 trillion in sales from the heating, ventilation, and air conditioning (HVAC) business by 2030 will be reached ahead of schedule.


● The Fruit of Mid- to Long-term Strategy

This achievement did not happen overnight. Two years ago, President Cho personally visited the NEOM City exhibition hall in Saudi Arabia to identify business opportunities and devise a mid- to long-term strategy. Saudi Arabia is accelerating the construction of AI infrastructure, including data centers, as part of its national strategy for the AI industry. President Cho proactively read this trend and has been exploring business opportunities since the beginning of this year.

The deep trust relationship with local partner Shaker Group, which has been co-developing the Middle Eastern HVAC and home appliance market for over 20 years since establishing a joint venture (JV) in Saudi Arabia in 2006, played a crucial role. It is reported that Shaker Group's management visited LG Science Park in Magok earlier this year, inspected LG Electronics' high-efficiency air and liquid cooling technology portfolio and test facilities, and were deeply impressed. The Shaker Group management proposed that they could create synergy with Data Vault's data center business within the Abunayyan family, leading to rapid discussions and large-scale cooperation. President Cho also met with Khalid Al-Falih, Minister of Investment of Saudi Arabia, in September this year to discuss cooperation plans, including the supply of cooling solutions. This cooperation is expected to be an important turning point for LG Electronics to establish itself as a key player in the AI supporting industry in the Middle Eastern market.

The explosive growth of generative AI is accelerating the expansion of data centers. If the enormous heat emitted by numerous high-performance chips is not controlled, AI services cannot operate. This is why cooling facilities have become so important, accounting for more than 30% of the total power of data centers. Market research firm MarketsandMarkets predicts that the AI data center market will grow to about KRW 1,300 trillion by 2030, indicating the growing potential of the cooling solution market.

● The Secret is Technological Prowess and Localization Strategy

LG Electronics' confidence stems from its world-class core component technology, known as 'core tech.' The technological prowess accumulated by directly developing and producing five key components—compressors, motors, pumps, heat exchangers, and inverters—boasts high energy efficiency and stability. The company has already proven its technological capability by supplying chillers to numerous data centers and nuclear power plants domestically and internationally. It can respond to customer needs with both air cooling methods, which cool the inside of data center rooms with large chillers, and liquid cooling solutions that directly cool high-heat components. The liquid cooling solution, which attaches cooling plates to high-heat components such as central processing units (CPUs) and graphics processing units (GPUs) and circulates cooling water to directly cool them, is gaining attention as next-generation technology due to its space efficiency and excellent energy efficiency.

A thorough localization strategy is also the secret to LG Electronics' rapid growth in the HVAC market. From research and development (R&D) to production, sales, and maintenance, everything is handled locally. This is to provide locally tailored solutions by finely reading the climate and residential environment differences worldwide. By producing HVAC products at 12 global production bases, the company enhances logistics efficiency and quickly responds to regulations and consumer demands in each region.

● Development of Customer-tailored Products

R&D centers located in Korea, the United States, Europe, and India develop products tailored to the climate characteristics and residential environments of each region. For example, in cold regions such as Alaska in the United States, Oslo in Norway, and Harbin in China, a consortium has been established for heat pump research. By testing major HVAC products, including residential heat pumps, and collecting data on heating performance and energy efficiency in extreme environments, the company applies this to product development.

LG Electronics plans to accelerate its global expansion, including in the Middle Eastern market, using this MOU as a stepping stone. As part of these efforts, the company recently signed a contract to supply cooling solutions to hyperscale data centers in the United States. It is also expanding cooperation with big tech companies like Google and undergoing certification procedures to supply cooling solutions to NVIDIA.

Additionally, the company is not sparing investments to secure future technological leadership. To test customer-tailored solutions, an AI data center dedicated testbed has been established at the chiller factory in Pyeongtaek, Gyeonggi Province. Furthermore, about KRW 50 billion is being invested in establishing an HVAC research center at Changwon University, with completion targeted for the first half of 2027.

Popular News