LG Electronics said on the 20th that it is reviewing all possibilities, including the abolition of the MC business division in charge of the smartphone business, sale, withdrawal, and business unit absorption integration, because of the group’s management’s judgment that it is difficult to withstand any longer. It becomes an answer. In fact, it is more realistic to express that the MC division of LG Electronics, which is in charge of LG phones, has drifted back and forth without a mast for the past several years. (☞related article)
LG Electronics’ smartphone business has been in the red for 23 consecutive quarters since the second quarter of 2015. The accumulated losses over the past five years amounted to 5 trillion won. This is an overwhelming amount for LG Electronics, with annual sales of 63 trillion won and operating profit of 2 to 3 trillion won.
So, LG Electronics began a strategy to withstand the deficit by reducing the width of the deficit through organizational reorganization and relocation of production bases from 3 to 4 years ago, and that it has reached that critical point is the background of the existence of this smartphone business. The sluggish smartphone business has a huge impact on other departments. There are also stories that the continuing redeployment of workforce and the march on deficit is having a negative impact on cooperation and communication between departments.
In fact, the challenges and ups and downs of LG smartphones began as long as their history.
While the Galaxy series brand in the IM segment of Samsung Electronics, which LG Electronics’ MC division considered as a competitor, has steadily grown and expanded as a single smartphone brand, LG Electronics introduced the Optimus series in 2012. It has tried to transform various brands such as the Vu series.
Eventually, last year, the G series was scrapped and the’Velvet’ brand, which used the product’s pet name as a brand, was introduced as in the days of feature phones. However, the market’s evaluation was grim. Rather, it is evaluated that such frequent brand changes have been more poisonous than beneficial to LG Electronics smartphones. The flagship flagship brand is changing too quickly. It is comparable to the disappeared cell star-Hwatong-Freeway-Cyon (CION, CYON).
Also, it is pointed out that the power was consumed for too long in the bout flipping game. Since 2015, LG Electronics has been striving to normalize the smartphone business as the company’s No. 1 goal since Joon-ho Cho, president of the MC business division. LG tried to reproduce this with its own success method, and dreamed of a resurrection by overturning a bout in the competition with Samsung and Apple with an original model. The world’s first modular smartphone G5, announced by MWC in March 2016, is representative. At the time of the announcement, it received tremendous attention, but it did not meet the value of use of consumers and was turned away from the market.
It was from this time that LG Electronics was criticized for focusing too much on the’Gimmick’ element rather than increasing the intrinsic value of the smartphone itself that users want. Of course, it was various attempts to overcome the crisis, but the market’s harsh evaluation that it was an irrational number out of the essence followed like a label. The market gradually declined and the market share in the North American market, which is a vegetable garden, also began to decline. LG Electronics’ MC division, which once overtook Nokia to the fourth place in the world market and to the third place by brand, eventually fell to the 9th place in the world market in 2019, and was defeated by the Chinese big three Huawei, Xiaomi, and OPPO. Had the humiliation of being placed in the Others.
According to the news familiar to LG, it is the norm that LG Electronics has decided this year as the last maginot line of the smartphone business. Experts point out that it’s great if it succeeds, but it’s well understood by seeing that pilot products, which can end as an experimental work, are put on the release lineup and are making the last move. In the market, the’rollable phone’, which has recently been released, is expected to be a crossroads.
Therefore, regardless of whether or not the rollable phone is released, the time for the decision is approaching whether LG Electronics will stop its smartphone business, sell it to another place, or maintain its name through the integration and abolition of the business unit (HE) while expanding ODM. .
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Currently, parts makers such as LG Electronics, LG Display and LG Innotek, do not have a high proportion of sales to LG phones, so it is a general theory that there will be no chain shock if LG Electronics leaves the business. In addition, the fact that the internal R&D capabilities of the MC business division have already declined significantly suggests the possibility of abolition or sale of the business. However, it is not easy to give up business as smartphones are the future key devices that play a pivotal role as a controller in the era of the Internet of Things (IoT).
An industry insider said, “LG Electronics is too late to achieve the success of’Wow Factor’ in the smartphone business. If you pursue a small success in your position while reflecting the needs of the market and users a little more, We can achieve results,” he said.