The 4 major points of watching LG Electronics’ smartphone withdrawal
② How to hire the number of employees…
③ Candidates for bidding participation… Google, Bean Group, Facebook, Volkswagen, etc.
④ Corporate performance is expected to be more than 4 trillion won in annual operating profit when smart phones are organized.
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LG Electronics (066570)‘Sick finger’ of the mobile communication (MC) division is reported to be in the process of selling LG(003550)At what level the e-Leader will sell the organization and which companies will become the new owners is drawing attention. In addition, attention is also paid to the appearance of the employees belonging to the MC business headquarters, which has 3,700 people. It looks at the issues surrounding the smartphone business division.
Is it a divisional sale or a general sale?
According to the related industry on the 21st, after LG Electronics President Kwon Bong-seok mentioned the sale of the MC business headquarters as one of the’all possibilities’ the previous day, the size of the organization that LG Electronics decided to sell has emerged as a point to watch. Various possibilities are raised, including sale of goods.
A powerful way to emerge in the industry is’partial sale’, which sells only the rest of the premium smartphone research and development (R&D) organization. In this case, the division and sale of overseas factories and intellectual property rights will also proceed. It is expected from inside and outside the company that the R&D organization is highly likely to move to the automotive parts solution (VS) business headquarters, which researches technologies related to autonomous driving, or the H&A business headquarters, which develops smart home services. An official in the business world said, “If LG Electronics releases technology related to smartphones with high connection to TV, home appliance, and electronic equipment business, it may be more difficult after the sale.” The reason I brought it to my family is because the connection with other businesses is still valuable,” he added.
Some people also talk about how to maintain design and production like Sony by leaving some production facilities. It is a method of continuing the business by concentrating its smartphone business capabilities only in certain regions such as Europe, Taiwan, and Hong Kong. An industry official said, “If the models are not diverse, smartphone production can be mass-produced with only some facilities. Like Sony, LG Electronics can choose to reduce its launch country and sell only a few models.”
How to maintain employment
The second spotlight is on whether to retain employment or not. As the MC business division was greatly shaken by the rumors of the sale from the beginning of this year, President Kwon settled on the point that’employee employment is maintained in principle’ and settled anxiety. An official at LG Electronics also confirmed that “maintaining of employment of the current manpower is the first principle, and there is no hopeful retirement for the manpower of the MC business division.” However, as the direction of business operation is decided, it is known that there is room for the relevant personnel to go to other affiliates within the group or to the business headquarters. Currently, the number of employees in the MC division is 3,724 as of the third quarter of last year, down to half the level of 7,460 in 2015.
Candidates for the bid to be discussed
Interest is also being focused on companies that will participate in the sale of the MC division. Currently, the industry is citing Vietnam’s Vingroup, Google, Facebook, Volkswagen, and Vivo as potential candidates to acquire LG Electronics’ MC business headquarters. Vingroup is operating a smartphone maker Vinsmart in Vietnam, where LG Electronics’ production line is located, and maintaining a mid- to low-end lineup, which is in good harmony with the MC division. However, there is a forecast that it will not be easy to raise funds for the sale as the resort business, the flagship of Vingroup, is experiencing difficulties due to the aftermath of Corona 19.
Google, which is continuing to strengthen the smartphone business such as the acquisition of Motorola, Facebook, which is working on augmented reality (AR) and virtual reality (VR) business, German automobile company Volkswagen, and China Vivo, are also being mentioned as candidates for bidding.
Will LG Electronics increase its corporate value?
It is predicted that annual operating profit will increase to more than 4 trillion won if LG Electronics closes its smartphone business, which has been in the red. Domestic securities companies including Korea Investment & Securities raised their target price by 22-29% at the same time after the statement in the name of President Kwon, suggesting the withdrawal of the smartphone business, came out the day before. “It is undeniable that LG Electronics’ valuation was discounted compared to its competitors,” said Ko Eui-young, a researcher at Hi Investment & Securities.
/ Reporter Lee Su-min [email protected]
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