LG Group’s Yeouido office building. Photo = Yonhap News
LG Electronics(159,000 +0.32%)Withdraws from the mobile phone business after 26 years. LG Electronics officially announced through a press release that it has decided to end production and sales of the mobile (MC) division in charge of the mobile phone business by holding a board of directors at its headquarters in Yeouido, Seoul on the morning of the 5th. LG Electronics’ decision to withdraw from the mobile phone business was reviewed by LG Electronics President Kwon Bong-seok at the end of January, saying, “We are considering reducing the mobile business unit in charge of smartphones and transferring them to other business units, etc., with all possibilities open.” It has been two months since it was revealed. LG Electronics has been negotiating for sale with Vietnam’s Vingroup, Germany’s Volkswagen, and US Google, but since there is no place to present the terms of the acquisition that LG Electronics wants, it eventually decided to disband the business unit.
LG Electronics’ withdrawal from the mobile phone business is due to its cumulative deficit that has grown like a snowball. LG Electronics’ smartphone business recorded an operating deficit for 23 consecutive quarters from the second quarter of 2015 to the fourth quarter of last year. By the end of last year, the accumulated deficit reached 5 trillion won. LG Electronics’ operating profit last year was 3,191.8 billion won. In order to increase the profitability of the mobile phone business, LG Electronics completely stopped domestic production from 2019 and produced products in Vietnam. In addition, the number of manpower in the mobile division from about 5,000 in 2017 was reduced to about 3,700 last year. Afterwards, LG Velvet, LG Wing, and other strategic smartphones were released, struggling for a rebound, but successively failed product box offices, resulting in a drop in market share. It is evaluated that the mobile phone business, which was the centerpiece of LG Group with global hits such as Prada phones and chocolate phones in the past, fell behind Apple and Samsung in the premium market and Chinese companies in the mid- to low-end market, and failed to respond properly to the smartphone era.
From that day on, LG Electronics is starting work on reassigning the workforce by receiving applications for the desired work department from about 3,700 employees of the MC division. First of all, the largest number of employees will be assigned to Changwon, Gyeongnam, where the home appliance factory and research institute are located. The policy is to send employees to group affiliates such as LG Energy Solution and LG Innotek. Since many of the employees who were in charge of the smartphone business are technical, it is expected that they can be absorbed into the group without any separate restructuring. President Kwon previously said, “There will be no artificial restructuring.” Overseas factories are pursuing conversion to TV and home appliances.
Reporter No Jeong-dong Hankyung.com [email protected]
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