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LGE Mulls Exiting Smartphone Business After 5-Year Loss of $4.5 Billion
At CES, LGE excited the industry with its rollable display smartphone, where they indicated as many as 500K rollable phones would be shipped in 2021. It was deemed to be a new beginning that had the potential to reshape the burgeoning foldable market now dominated by Samsung Display and Samsung Mobile. A new form factor that delivered the same large and small display sizes but at a much reduced thickness and weight. But one caveat in the announcement was that BOE supplied the display and not the leader in rollable display technology, sister company LG Display.
The last week, LGE CEO Kwon Bong-seok raised the prospect exiting the smartphone business by saying, “Regardless of any change in the direction of the smartphone business operation, the employment will be maintained, so there is no need to worry. An LG official followed with, “Since … competition in the global market for mobile devices is getting fiercer, it is about time for LG to make a cold judgment and the best choice. The company is considering all possible measures, including sale, withdrawal and downsizing of the smartphone business.” Some 60 percent of the staff there would be moved and reassigned to other business units within the company or to other LG affiliates, the reports said. Last year LGE indicated it would follow Samsung by increasing the volume of original development manufacturing in a bid to raise efficiency in production and cut costs at the money-losing business unit. ODM orders surpassed 30 percent of Samsung’s total phone production last year, while LG’s exceede70 percent, according to Counterpoint.
LG had a history of mediocre products and last year ditched its smartphone brand G series and to start new smartphones by launching the radically designed LG Velvet and the LG Wing, but the products were not well received and LG’s lost market share. In the third quarter of 2020, LG shipped 6.5m smartphones, down from 7.2 million Y/Y, according to Counterpoint at a time when most OEMs started to recover from Covid-19. The company held a 2% share in the market. As of last year, the smartphone business had posted operating losses for 23 consecutive quarters, since the second quarter of 2015. In the third quarter of 2020, the operating loss stood at 148.4 billion won, narrowing from 206.5 billion won in the first quarter and 237.8 billion won in the second quarter. LG Electronics CEO Kwon, when he took office in January 2020, vowed to make a turnaround in the smartphone business by 2021. “The company is improving profitability of the smartphone business by slashing costs and will seek growth in the premium market next year,” Kwon told reporters at a ceremony to mark Electronics and IT Day in December.
Korea’s NewsPim reported that Vietnam’s VinGroup — the parent company of nascent smartphone brand VinSmart — is interested in acquiring LG’s North American smartphone operations. LG’s smartphone sales network, after-market support center, R&D center employees, and Latin American production plant belonging to the US business would be prime acquisition targets in the event of a deal. North America is LG’s most popular market, with the firm taking third place in the US with 13% market-share in Q3 2020. VinSmart is virtually unknown outside Vietnam, but the company joined ZTE in being among the first to offer a phone the VSmart Aris Pro, which packs a 20MP camera under the screen.
At CES, LGE excited the industry with its rollable display smartphone, where they indicated as many as 500K rollable phones would be shipped in 2021. It was deemed to be a new beginning that had the potential to reshape the burgeoning foldable market now dominated by Samsung Display and Samsung Mobile. A new form factor that delivered the same large and small display sizes but at a much reduced thickness and weight. But one caveat in the announcement was that BOE supplied the display and not the leader in rollable display technology, sister company LG Display.
The last week, LGE CEO Kwon Bong-seok raised the prospect exiting the smartphone business by saying, “Regardless of any change in the direction of the smartphone business operation, the employment will be maintained, so there is no need to worry. An LG official followed with, “Since … competition in the global market for mobile devices is getting fiercer, it is about time for LG to make a cold judgment and the best choice. The company is considering all possible measures, including sale, withdrawal and downsizing of the smartphone business.” Some 60 percent of the staff there would be moved and reassigned to other business units within the company or to other LG affiliates, the reports said. Last year LGE indicated it would follow Samsung by increasing the volume of original development manufacturing in a bid to raise efficiency in production and cut costs at the money-losing business unit. ODM orders surpassed 30 percent of Samsung’s total phone production last year, while LG’s exceede70 percent, according to Counterpoint.
LG had a history of mediocre products and last year ditched its smartphone brand G series and to start new smartphones by launching the radically designed LG Velvet and the LG Wing, but the products were not well received and LG’s lost market share. In the third quarter of 2020, LG shipped 6.5m smartphones, down from 7.2 million Y/Y, according to Counterpoint at a time when most OEMs started to recover from Covid-19. The company held a 2% share in the market. As of last year, the smartphone business had posted operating losses for 23 consecutive quarters, since the second quarter of 2015. In the third quarter of 2020, the operating loss stood at 148.4 billion won, narrowing from 206.5 billion won in the first quarter and 237.8 billion won in the second quarter. LG Electronics CEO Kwon, when he took office in January 2020, vowed to make a turnaround in the smartphone business by 2021. “The company is improving profitability of the smartphone business by slashing costs and will seek growth in the premium market next year,” Kwon told reporters at a ceremony to mark Electronics and IT Day in December.
Korea’s NewsPim reported that Vietnam’s VinGroup — the parent company of nascent smartphone brand VinSmart — is interested in acquiring LG’s North American smartphone operations. LG’s smartphone sales network, after-market support center, R&D center employees, and Latin American production plant belonging to the US business would be prime acquisition targets in the event of a deal. North America is LG’s most popular market, with the firm taking third place in the US with 13% market-share in Q3 2020. VinSmart is virtually unknown outside Vietnam, but the company joined ZTE in being among the first to offer a phone the VSmart Aris Pro, which packs a 20MP camera under the screen.
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