LG phone eventually withdrew rather than sold… “It will be difficult to proceed with secret M&A”

LG Electronics has stepped up to withdraw from the mobile business. It is reported that the LG Electronics board of directors, which will be held on the 5th of next month, will make the final decision with these details. It has been about 70 days since LG Electronics President Kwon Bong-seok officially announced the’full review’ on January 20th.

According to the business community on the 21st, LG Electronics decided at the board of directors on the 5th of next month to decide the direction of operation of the mobile communication (MC) business headquarters, which is the smartphone business division, and in fact, it is known that it will discuss the withdrawal method.

Since LG Electronics announced a full review of the operation of the MC business headquarters in January last year, various possibilities such as sale, withdrawal, reduction, and maintenance have been raised both inside and outside the company. Last month alone, the most promising proposal was the overseas sale. Vietnam’s Vingroup, Google, Facebook, and Volkswagen are among the targets for sale. However, there has been little progress in the meantime.

A business official who requested anonymity said, “M&A negotiations have to be conducted secretly, but it would have been difficult for the M&A negotiations to be carried out effectively because a full review has already been formalized.”

Even if the withdrawal of the MC division is confirmed, there are many issues to consider. It is possible to proceed with a’partial withdrawal’ rather than a complete withdrawal that completely ceases the mobile business. It is observed that if a partial withdrawal is carried out, a rollable phone (a rolled-up type smartphone) that was well received at’Consumer Electronics (CES) 2021′, the world’s largest consumer electronics and information technology (IT) exhibition in January, can be released.

LG Electronics released a teaser video of a rollable phone for about 5 seconds at the’CES 2021′ press conference. As the screen on the back of the smartphone gradually unfolded, it grew to a wide screen like a tablet PC. The IT industry and foreign media have commented that the form factor (form factor, product appearance) is better than a foldable phone that folds the screen. When the foldable phone is folded and unfolded, wrinkles appear in the folds of the two screens due to its structure.

The key is whether it is possible to reap stable profits through a rollable phone. The symbolism of innovating the smartphone form factor is large, but the market size is not yet large. According to the market research firm Display Supply Chain Consulting (DSCC), the size of the foldable and rollable phone market last year was around 1 billion dollars (about 1.1 trillion won).

It is known that LG Electronics plans to move all its employees to other departments even if the MC business headquarters completely withdraws. About 3700 people, or 9.5% of the company’s total workforce, are employed at the MC business headquarters.

Kim Dong-won, an analyst at KB Securities, said, “(Withdrawal of the smartphone business) will serve as an opportunity to resolve concerns over the continuing deficit and uncertainty in the future. It will act as a “analyzed.

Meanwhile, if LG Electronics’ withdrawal of the mobile business becomes a reality, the domestic smartphone market structure is expected to change. LG Electronics has a 2% share of the global smartphone market, but it accounts for 13% in Korea. In the industry, LG Electronics’ vacancy is expected to be divided between Samsung Electronics (65%), which is the No. 1 market share, and Apple (21%), which is the second place.

As if Apple was conscious of this, last month in Yeouido, Seoul, it opened the second flagship store in Korea, the’Apple Store’, and began to woo Korean consumers. The new product launch period was also a week after the first release country, which was a month later.

However, as LG Electronics has been stronger in mid- to low-end phones than premium phones in Korea, the outlook is that most LG product consumers will switch to Samsung Electronics smartphones of similar amounts. The reason is that the operating system (OS) of Samsung Electronics and LG Electronics’ smartphones are the same.

Reporter Choi Hyun-joo [email protected]