The Korean electronics giant has benefited from meeting stiff competition head on Pasta for dinner? At a touch of a button, LG Electronics' glossy Internet-equipped refrigerator will display a mouthwatering dish with a recipe. An automatic inventory will show what is inside without opening the door. It is a fridge with a brain that can place orders to the nearest grocery store when you are running low on tomato sauce. Not only that. Its 15-inch flat door-mounted screen can turn into a television, a stereo or even a digital camera. Once known as a peddler of cheap home appliances, South Korea's LG is reinventing itself to come up with consumer electronics that dazzle even the pickiest customers. LG - which competes with Samsung Electronics in producing mobile phones, TVs and refrigerators - aims to beef up its brand by focusing on sales of high-technology home appliances that are more profitable. 'It's improving product quality and brand image and investing more,' said Oh Sung-sik, chief investment officer at Franklin Templeton Investment Trust Management, which holds LG shares. 'Their market share is growing.' LG's strategy has paid off. It had record earnings last year and its shares are at one-year highs after they were relisted last April as a unit of holding company LG Group. The upturn in LG's mainstay appliance business - which made up 32 per cent of revenues but 59 per cent of profits last year - comes at an auspicious time. LG's other businesses - digital televison, computer monitors and mobile-phones - are facing increased competition and falling prices. LG started as the first Korean maker of radios in 1958 and began making refrigerators in 1965. The company later expanded to produce other home appliances. The company produced refrigerators and air-conditioners for market leaders such as Whirlpool Corp and General Electric, but introduced its own brand in the key United States market in the late 1990s. It is now the world's biggest maker of air-conditioners with a 15.4 per cent share. and is moving fast to grab a bigger slice of television and handset markets. Exports account for 70 per cent of sales. Premium products such as 'Whisen' air-conditioners, 'Dios' refrigerators and 'Tromm' washing machines have already taken the domestic market by storm. It is introducing a home-network system that links appliances through mobile handsets or the Internet. LG's latest invention is a vacuum-cleaning robot called 'Roboking'. Roboking, shaped like something between a toy car and a dog, cleans the place on its own and knows when to return to its charger. An upgraded model will have a security alarm that can detect strangers in the house. 'LG Electronics has always been in the shadow of Samsung Electronics,' said Yu Chang-eyun, an analyst at BNP Paribas Peregrine Securities. 'But having a tough rival has helped LG in many cases. LG is certainly better than Samsung in new product launch, cost competitiveness and design.' Despite LG's strength in home appliances, its digital television and personal computer sales face tough times as buyers tighten belts. The display business, which accounted for 43 per cent of sales last year but only 25 per cent of earnings, is likely to see profits fall in the second quarter, due partly to the football World Cup that spurred a sales boom in the year-ago quarter. LG's handset business, a latecomer to an overcrowded, saturated mobile-phone market, has suffered from the Sars outbreak in China and heated competition. LG is the world's sixth-largest handset producer with a 4.5 per cent market share in the first quarter, up from 3.1 per cent in the fourth quarter, according to research group Gartner Dataquest. Samsung had a 10.5 per cent share, against 9.3 per cent previously. The mobile-phone business made up 24 per cent of sales last year and 26 per cent of profit. 'Its strong position in home appliances has compensated for its weakness in the handset division,' said Kang Byung-do, a fund manager at Kyobo Investment Trust and Management. Investors are taking notice, especially because LG shares are cheap compared with competitors. Shares in LG, South Korea's eighth-biggest stock, with a market value of US$6.2 billion, trade at a forward price-earnings multiple of 11.2, compared with Samsung's 10.9, Matsushita's 84.9 and Philips' 44.2. 'We believe LG is well-positioned to show earnings growth and improvement in its return on equity for the next two years,' said Morgan Stanley, adding it expected LG's profits for this year to spike 68 per cent to 836 billion won (HK$5.47 billion). LG, which has a 51,300 workforce, plans to invest about 1.8 trillion won in new technologies and plant upgrades this year, up 40 per cent from a year ago. 'The home-appliance business has been the company cash cow and allowed us to finance and expand businesses,' LG spokesman Oh Sea-chun said.