LG Electronics with war luck… The fate of 3,700 people is also divided. [차민영의 포스트it]

5兆 cumulative operating deficit… Smartphone business withdrawal strand
Prospects for announcement at the board of directors of LG Electronics on the 5th
Focus on the direction of manpower rearrangement and patented technology utilization plan
To the glory of the feature phone… The sin behind the smartphone revolution

[아시아경제 차민영 기자] #. Eventually, a war looms over LG Electronics, which was caught by the withdrawal of the smartphone business. As the initial response to the smartphone revolution 14 years ago failed, the company faced a cumulative deficit of 5 trillion won and made a final retreat. Another important task is how to’how and well’ to deploy 3,700 people in the business unit, even if the business disappears.

LG Electronics is expected to officially announce the business plan of the Mobile Communication (MC) Business Division at the Board of Directors on the 5th. While the’complete withdrawal’ of the business has become a pre-determined fact, the issue of relocation of 3,700 employees and the direction of use of core technologies and patent rights have not been disclosed.

For two months, the company’s management has negotiated with global companies that are willing to take over, but it is said that there was no significant income due to differences in terms and conditions. An official in the securities industry pointed out, “We have been discussing the sale of the business, but we know that there has been no progress. Since then, there has been no special talk in the market, so we are waiting for an official announcement.”

China’s smartphone competitors such as Huawei, Xiaomi, and Oppo were offensive, and the sale of M&A was not good. The subject of underwater contact has also changed several times. Vietnam’s Vingroup, which was said to be the most influential, reviewed the acquisition of the U.S. division, but it is known to have caught up with its direct entry. Recently, news that African smartphone companies were also negotiating an acquisition came out from outside.

There is also a strong self-help perspective inside the company. This is because the cumulative operating deficit reached 5 trillion won with a deficit for 23 consecutive quarters until the fourth quarter of 2020. In its audit report, LG Electronics admitted, “We made great efforts such as launching innovative products to improve the smartphone business structure, but we did not achieve meaningful sales expansion and profitability improvement.” The development of the’Rainbow’ project, which LG Electronics announced as a strategic product in the first half, and the next form factor’Rollable’, has also been virtually stopped.

In the past, LG Electronics’ mobile phone business, which succeeded in black label series such as’Prada Phone’,’Chocolate Phone’, and’Shine Phone’, has stagnated, and by the time of 2010, the management’s error in business judgment was a major factor. When Apple led the smartphone revolution with the launch of the iOS-based iPhone in 2007, LG Electronics settled in the glory of its feature phones in the past. I also made the mistake of listening to the advice of McKinsey & Company, a famous consulting firm that underestimated the impact of smartphones. Even when rival Samsung invests in UI and UX, the core of smartphones. According to Strategy Analytics (SA), as of the end of the third quarter of last year, the domestic Samsung Electronics market share (MS) exceeded 70%, while LG Electronics decreased to 9%.

Of course, LG Electronics also tried to counterattack with smart phone products that focus on technology such as’Optimus G’. As the internal sense of crisis grew, the late Optimus G, called’Chairman’s Phone,’ created under the direction of the late LG Group chairman Koo Bon-moo, was launched in 2012 and received initial response. Optimus G is also the world’s first smartphone equipped with Qualcomm LTE-based quad-core Snapdragon S4 Pro. ‘LG V40’ was also the world’s first smartphone with a triple camera configuration consisting of a main, wide-angle, and telephoto lens.

The biggest problem at this point is people. For the past two months, LG Electronics President Kwon Bong-seok has been looking for a negotiator for global sales, while internally, it seems that there have been many concerns about saving the house, including the relocation of 3,700 people. It is highly likely that the relocation of personnel will take place immediately after the board of directors finalizes the business policy in April and shares it within the company. About 3,700 employees of the existing MC business division are expected to be transferred to other business units in the first half of this year, or to affiliates such as LG U+, LG Energy Solutions, and LG Mag and E-Powertrain, which are about to be launched in July. It is predicted that core technologies such as premium smartphone-related patents will be internalized and synergies will be created with future businesses.

The atmosphere of LG Group affiliates is also cluttered. Except for core development tasks, these tasks are bound to overlap. An industry insider said, “I heard that many of the employees in LG Electronics’ MC division are not developers, but office workers. Existing affiliates’ employees also have a lot of worries related to the large shift of manpower.”

“No matter how the business operation direction is decided, in principle, the employment of the members is maintained, so there is no need to be anxious.” This is President Bong-Seok Kwon, who tried to prevent employee fluctuations while suggesting the possibility of abandoning the smartphone business on January 20th. It will be noted what decisions will be made at the board of directors on the 5th.

Reporter Cha Min-young [email protected]