Input 2021.01.20 17:13
Accumulated deficit of 5 trillion won for 5 years, leading to integration in HE business headquarters
Cards sold to US big tech companies were also discussed
Share price soared 13% in anticipation of raising corporate value
In the industry, the possibility of the smartphone business division being drastically reduced to a team or being sold to a big tech company in the US is being discussed.
On the 20th, CEO Kwon Bong-seok, LG Electronics’ CEO, sent an e-mail to employees and said, “We are opening up all possibilities and reviewing the direction of the operation of the Mobile Communication (MC) business headquarters.” “We have come to the point where we have to make the best choice by calmly judging our future competitiveness.” As such news became known through the media, LG Electronics’ share price rose nearly 13% on the same day.
LG Electronics officially said that it has not been decided yet. However, when looking at the industry as a whole, it is known that LG Electronics has a high possibility of integrating the MC business unit with the home appliance (HE) business unit and reducing the smartphone business to one team within the business unit.
An industry insider said, “We know that there is a high possibility of continuing the smartphone business in the direction of releasing only one or two flagship (high-end) smartphones per year, and increasing manufacturers’ development production (ODM) more than now.” Said.
An official in the parts industry said, “Recently, among smartphone parts manufacturers, there is a movement to exclude LG Electronics from the supply chain (SCM).” It is interpreted as meaning that LG Electronics’ attractiveness as a customer has disappeared from the parts maker’s point of view.
LG Electronics is reorganizing its business structure focusing on outsourcing production, such as the establishment of a new ODM business manager within the MC business division. This is a measure to minimize the cost of the smartphone business, which is not profitable. According to counterpoint research, a market research firm, the proportion of ODMs for LG Electronics is currently estimated at around 70%. If the smartphone business shrinks or reorganizes, this proportion is expected to increase further.
In the stock market, there is also talk that Microsoft (MS) or Google can take over LG Electronics’ smartphone business. Currently, Microsoft is releasing a dual-screen phone and Google is releasing a pixel phone, but it is not showing a strong presence in the smartphone market. It is also known that LG Electronics broke down last year while negotiating the sale of smartphones with Chinese smartphone maker Vivo.
LG Electronics’ MC business division has been operating losses for 23 consecutive quarters since the second quarter of 2015. By the end of last year, the cumulative operating deficit amounted to 5 trillion won. At the recently held’CES 2021′, the world’s largest information technology and home appliance exhibition, the rollable (screen rolled up) phone’LG Rollable’ was unveiled in just 5 seconds and received favorable reviews around the world. Although it is aiming to be released in the first half of this year, the possibility of not actually mass-producing it has been raised as product details have not been disclosed. It was to show off technology to sell the smartphone business.