LG Electronics “Sale, reduction, etc. All possibilities review stage”
Expert “Sale is the best scenario in terms of corporate value”
Third place in smartphone market share in North America when Google acquired
Smartphone-to-future OS ecosystem reinforcement means
Observation of sales promotion after business reduction
[오피니언뉴스=정세진 기자] After LG Electronics announced its position that it would open all the possibilities, including the sale, to the MC division in charge of the smartphone business, interest in candidates for acquisition is growing.
Experts are citing high-tech IT companies, Southeast Asian smartphone manufacturers, and even European automakers as candidates for acquisition if the sale becomes visible. Among them, the securities industry expressed an opinion that foreign IT-based companies such as Google are the dominant.
As of the 22nd, LG Electronics is in the position that “there is still a review stage and no decision has been made for all the possibilities, such as sales, increase in the proportion of manufacturer development and production (ODM), and business reduction.” In the industry, it is difficult to improve the current situation as the MC division, which has accumulated a deficit of 5 trillion won over the past five years, is expanding ODM. This is why the financial investment industry and the electronics industry predict a high possibility of sale.
Kim Ji-san, head of Kiwoom Securities Research Center, told LG Electronics’ MC business division, “The best scenario in terms of corporate value is the sale of the business unit.” Expected.
On the 20th, after LG Electronics CEO Kwon Bong-seok announced its position on the MC division, LG Electronics’ stock price soared more than 25% in two days. Based on the closing price of the previous trading day, it rose 12.84% on the 20th and 10.87% on the 21st, closing for the second consecutive trading day.
LG Electronics’ market cap increased by 6 trillion won to 30,3567 billion won in two days from the trading day on the 21st, surpassing the market cap of 30 trillion won for the first time in history. As of 10:30 am on the 22nd, LG Electronics’ stock price is rising slightly compared to the previous day’s closing price, and continues to rise. This is a proof that the stock market has shown a positive response to LG Electronics’ restructuring review of the MC division.
In the financial investment industry, various acquisition targets from Google, Chinese and Vietnamese smartphone makers to the Volkswagen Group are being quickly discussed.
In the industry, when LG Electronics sells its MC division, Google is the company that can generate the greatest synergy. Google has collaborated with LG Electronics in 2012 by releasing smartphones such as Nexus 4, 5, and 5X.
According to the market research firm Scat Counter, the global smartphone operating system (OS) share as of June last year was 74.2% for Google Android and 25.2% for Apple’s iOS. Google, the absolute powerhouse of smartphone OS, has tried to manufacture hardware directly, but it has not achieved great results.
When Google acquires LG smartphones, it quickly ranks third in the North American market
In this situation, the industry expects that if Google acquires the MC division of LG Electronics, it can create two major synergies.
First of all, it can expand the smartphone market share. Google unveiled new products such as’Pixel 5’and’Pixel 4a 5G’ in October of last year, and is steadily aiming to enter the smartphone market. According to market research firm IDC, Google’s smartphone’Pixel 4′, which was released earlier last year, sold only 2 million units, 1.5 million units less than the previous one, for 6 months.
According to market research firm Strategy Analytics (SA), Google’s share in the U.S. smartphone market from 4.7% in 2019 dropped to the 3% level in the first half of last year. On the other hand, SA reported that LG Electronics ranked third in the North American smartphone market share with 14% after Samsung Electronics (33.2%) and Apple (31.5%) in the third quarter of last year.
In the situation where LG launched 5G phones such as’V60 ThinQ’ and’LG Velvet’ in the US market, it is possible to quickly rise to the third place in the North American market if Google, which has a small market share, acquires the smartphone business.
When securing meaningful smartphone market share, Google can maximize performance by optimizing the OS and hardware like Apple.
The industry says that even if the hardware performance is poor, the lack of performance can be overcome by optimizing the OS. This is because if the hardware has the same performance, the manufacturer’s product that can optimize the OS shows better performance.
It is observed that Google can increase the hardware level and strengthen its competitiveness by optimizing the OS by making and selling smartphones and accumulating user data. In this case, you have to bear the burden of competing with smartphone makers such as Samsung Electronics, which uses its own OS.
An industry insider said, “In fact, there is only Android or Apple in the smartphone OS market, and Apple operates a closed ecosystem,” he said. “Even if Google expands its smartphone market share, there will be no manufacturer that can escape the Android camp.”
Synergy with Google subsidiary’Waymo’ is expected
The second is synergy with the future car business. The industry predicts that smartphones will become the key connected devices that control cars in the initial stage of commercialization of autonomous vehicles. Currently, Google is developing autonomous vehicles through its subsidiary Waymo.
Waymo has already been piloting a fully self-driving taxi’Waymo One’ in Phoenix, Arizona, USA since 2018.
If Google has a competitive edge in the smartphone business, it can be used by linking the smartphone with Waymo to use services such as taxi calling, autonomous driving control, and payment. Android Auto, an OS for automobiles, is also a Google product. It is possible to build a wide OS ecosystem that connects smartphones and autonomous vehicles.
Google is also competing with Apple in this area. Apple started developing future cars through the’Titan’ project in 2014. Recently, there were reports that Kia Motors was selected as a partner for the Titan project and plans to launch an electric vehicle in 2024.
With Apple also releasing the automotive OS’CarPlay,’ it can build a large-scale OS ecosystem that connects smartphones, tablets, watches, and self-driving cars if hardware is produced in cooperation with Kia Motors. From Google’s point of view, even in order to maintain the OS ecosystem, it is possible to choose to draw a confrontation picture through the acquisition of LG Electronics’ MC division.
Putting it down, there are many places to go The smartphone division…
It is in the same context that Volkswagen is being discussed as a target for acquisition. This is because it can utilize the synergy between electronic components and smartphones. In particular, for automakers who lack understanding of IT technology, the LG smartphone division, which has accumulated technological prowess for a considerable period of time, can be an attractive option for securing competitiveness.
In addition, smartphone makers in China and Vietnam are also being discussed as candidates for acquisition. In this case, industry analysis is that it is a strategy to increase market share by utilizing LG Electronics’ technology and brand image.
On the other hand, in the financial investment industry, there is an analysis that even if LG Electronics sells its MC business headquarters, it will leave core research personnel and use related technologies to use home appliances and electronic components.
In addition, when looking at the size of the MC division, which has more than 3,000 people with annual sales of 4 trillion won, there are observations that it will not be easy to find a target for acquisition unless it goes through the process of reducing the scale for the time being.
Reporter Jeong Se-jin[email protected]
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