LG Electronics Board of Directors on the 5th
With the end of mobile production and sales
There was no rollable phone release
Photo = Yonhap News
LG Electronics(162,000 +2.21%)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. An official from LG Electronics said, “We have decided to end the mobile phone business on July 31,” and said, “Amid the recent solidification of the Yanggang system in the premium mobile phone market and major competitors focusing on the entry-level mobile phone market, price competition intensifies. The former has not been able to achieve results due to inadequate response,” he revealed the background of the withdrawal.
Because there was no rollable phone
LG Electronics produces mobile phones only by the end of May so that it can supply the products that it has previously promised with business partners such as telecommunications companies. Even after the mobile phone business is over, LG Electronics will continue to provide sufficient after-sales service so that consumers and existing users will not experience inconvenience. According to the decision to withdraw from the mobile phone business, LG Electronics announced that it has decided not to launch the world’s first’rollable smartphone’ that was previously announced.
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 a sale with Vietnam’s Vingroup, Germany’s Volkswagen, and US Google, but there is no place to offer LG Electronics’ desired acquisition conditions, so it has decided to end the business.
Can’t endure the 5 trillion deficit
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.
Continued development of mobile source technologies such as 6G
Even if LG Electronics terminates its mobile phone business, it continues to research and develop core mobile technologies for future preparation. Core mobile technologies such as 6G mobile communications, cameras, and software are required for next-generation TVs, home appliances, electronic parts, and robots. In particular, after standardization around 2025, we will accelerate the securing of 6G original technology that is expected to be commercialized in 2029. Through this, it prepares for the era of Ambient IoE (AIoE) in which people, objects, and spaces are closely and organically connected as well as autonomous driving.
Retention of employees in the mobile business unit
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]