1~2% of global market share, judged’limit’ to deficit for 23 consecutive quarters
Kwon Bong-seok, president of LG Electronics, “opens up all possibilities including sale”
LG Electronics will significantly reduce its smartphone business. It is known that they are also considering selling or stopping the business. It is analyzed that a total restructuring of the smartphone business, which has become an’Aemul Complex’, has been undertaken with only a cumulative deficit of 5 trillion won.
In an in-house message announced on the 20th in the name of President Kwon Bong-seok, LG Electronics said, “We have reached the point where we must make the best choice by calmly judging the current and future competitiveness of the mobile business.” We are reviewing closely.”
President Kwon said to the employees of the MC business division in charge of the smartphone business, “No matter how the direction of business operation is determined, in principle, employment is maintained, so there is no need to be anxious.” “We will communicate as soon as the direction of business operation is determined.” did.
In the industry, it is observed that LG Electronics will only leave some functions such as research and development (R&D) of advanced smartphone technologies. An industry insider said, “Manufacturing and marketing are the most expensive things in the MC business division,” he said. “There is a high possibility of giving up and remaining as a smartphone design company.
The MC division has been continuing its deficit march from the second quarter of 2015 to the fourth quarter of last year. In 2019, measures such as halting domestic smartphone production and reducing the size of the MC division’s personnel by switching to another division were followed, but operating profit remained negative.
LG Electronics started the mobile phone business in 1989. Currently, the global smartphone market share is 1~2%. In the premium product market, it is behind Apple and Samsung Electronics. Its position is also narrow in the mid- to low-end phone market. It is an atmosphere that cannot withstand the volume offensive from Chinese companies such as Huawei and Xiaomi. It is known that the LG Wing, a variant form factor phone, which was ambitiously introduced last year, also did not reach 100,000 units.
It is unclear whether the rollable phone announced at’CES 2021′, the world’s largest IT and home appliance exhibition this month, will be released in time. The rollable phone is a product that can increase or decrease the screen size by wrapping both ends of the display. A company official said, “There is currently no decision, so we are continuing to develop rollable phones.”
‘5兆 deficit’ eventually’scalpel’ to the smartphone… Reorganized into AI home appliance and old battlefield
Why organize the mobile phone business
LG Electronics made a tough choice. Beyond LG Electronics, it was decided to put a’scalpel’ on the smartphone business, which was considered as the’sick finger’ of the entire LG Group. It was judged that it was meaningless to continue maintaining the business with the cumulative deficit reaching 5 trillion won. In the industry, it is evaluated that Kwang-mo Koo (pictured), who began adjusting the business portfolios of major affiliates of the group since last year, made a’decision’.
After the smart phone business is organized
LG Electronics launched the’Optimus’ series in 2012 and started the smartphone business. It has only made operating profit for two years. The MC business division, which is in charge of the smartphone business, has posted operating losses for 23 consecutive quarters since the second quarter of 2015.
Selling or collapsing business units is a classic, but neither was easy. This is because the MC business headquarters is a’report of advanced technology’. Many of the core technologies required to manufacture other products such as displays come from the MC division. It adversely affects the sales and operating profit of affiliates. LG Innotek, which produces smartphone parts, is highly dependent on the MC division. This is the background that LG has not been able to close the smartphone business so far.
The atmosphere has changed since last year. LG Group Chairman Koo Kwang-mo created a CSO (Chief Strategy Officer) organization in each subsidiary and worked to select the business to be stopped and the business to be grown. At the time, the evaluation of the MC division by the CSO organization was dismal. Considering the TV and home appliance business, LG Electronics’ market cap should reach 50 trillion won, but the main point was that it is staying at around 20 trillion won due to the smartphone business.
LG Electronics President Kwon Bong-seok, who promoted’pragmatic management’, was also said to have been negative in maintaining the smartphone business as it is. An industry insider said, “I know that discussion on the continuation of the smartphone business continued at the LG Group business briefing held in November, presided over by Chairman Gwang-mo Koo in November of last year.” Said.
Abandonment of business after ten days of rollable phone release?
At the’CES 2021′ press conference held on the 11th, Kwon presented a’rollable phone’ that freely increases and decreases the size of the screen by rolling both ends of the display. At that time, it was well received in the industry. This was because, unlike the existing foldable phone that folds in half, there are no marks left on the folds. The reason that LG Electronics unveiled the rollable phone just before the announcement of the business reduction is interpreted for the purpose of emphasizing that it is the world’s top class in terms of smartphone technology. It is analyzed that it was a measure to raise the ransom price with the sale of the MC division in mind.
In the meantime, LG Electronics has introduced several new types of products that are distinct from Samsung Electronics and Apple. The modular smartphone’LG G5′ introduced in 2016 is considered a representative example. Like Lego, it was the concept of assembling desired functions to provide an expanded experience. The result was a failure. The plan to release additional modules was canceled due to the cold reaction of consumers.
In 2019, products equipped with a detachable secondary screen,’Dual Screen’, were released. To counter the foldable phone, the display was increased to two. Samsung Electronics’ first foldable phone,’Galaxy Fold’, was delayed due to quality problems, and it was successful, but its popularity did not last long.
LG Velvet, which was introduced in the first half of last year, emphasized design and cost performance. However, the box office failed as it was evaluated for lowering the price and specifications (specifications) together. In October of last year, it released the’LG Wing’, a variant form factor phone that can be turned into a’T shape’ by rotating the top of the two overlapping screens. However, the industry estimates that the sales of this product have not reached 100,000 units.
During this process, the head of the MC division was also changed several times. Since 2015, President Jo Jun-ho, vice president Hwang Jung-hwan, president Kwon Bong-seok, and vice president Lee Yeon-mo have gone through ups and downs as head of the MC business division.
Reporter Song Hyung-seok/Hong Yoon-jung [email protected]