North American Smartphone Sales Slump... 19 Consecutive Quarters of Losses
Seeking Revenue Rebound by Expanding 5G Smartphone Lineup
[Asia Economy Reporter Han Jinju] Despite efforts to reduce costs, LG Electronics has failed to escape the red for 19 consecutive quarters. This year, the company plans to expand sales by increasing its 5G smartphone lineup and is also considering launching new form factor products, including foldable phones, starting in 2021.
On the 30th, during LG Electronics' Q4 earnings conference call, Shin Jaeseok, Head of Planning and Management at LG Electronics' MC Business Division, stated, "The technical verification of foldable smartphones has been completed, but concerns remain regarding long-term reliability and whether the value provided to customers justifies the price increase associated with display implementation."
He added, "We plan to launch differentiated innovative products in 2021 to change customer perceptions and transition to a business structure that can create a virtuous cycle. We are developing various form factor technologies, including foldables. New types of products will be released when quality issues in usage are resolved and they can provide value to customers."
Samsung Electronics led the way last year with the 'Galaxy Fold' and has been expanding its foldable smartphone lineup as a new growth engine this year. In contrast, LG Electronics released the V50 last year, presenting the 'Dual Screen' as a reasonable multitasking alternative, but due to stagnation in the smartphone market and poor performance in the North American market, losses have actually increased. Competition is intensifying not only with Samsung and Apple but also with Chinese manufacturers, causing LG's presence in the smartphone market to shrink day by day.
The deterioration in Q4 results last year was largely due to decreased sales of budget smartphones in overseas markets such as North America. Increased competition with other smartphone manufacturers led to reduced sales, and weaker-than-expected sales performance impacted revenue. Shin Jaeseok said, "Marketing costs increased due to new product launch promotions and subsidy reduction policies by carriers in North America and Korea. Additional costs were incurred to normalize year-end inventory, expanding the deficit compared to the previous quarter."
To improve performance, LG Electronics plans to expand its 5G smartphone lineup this year, ranging from flagship to mid-range and budget models. For budget 5G smartphones, the company aims to enhance sales by equipping core specifications while securing cost competitiveness through ODM. Since last year, LG Electronics has been relocating its production base to Vietnam to focus on cost reduction.
Shin said, "We plan differentiated supply tailored to the unique characteristics of the global 5G market. With the launch of 5G services in North America and Europe, competition among carriers to secure subscribers is expected to unfold through aggressive marketing using premium products. We will respond to initial demand by launching the premium-spec V60."
In the domestic market, LG aims to increase sales by expanding the budget product lineup. Shin explained, "The Korean market has already entered an active phase of 5G service, and competition among carriers has slightly eased compared to last year. We will expand sales by introducing 5G products with new designs and reasonable prices to make them accessible to more customers."
On this day, LG Electronics announced that the MC Business Division recorded sales of 1.3208 trillion KRW and an operating loss of 332.2 billion KRW in Q4. Compared to the same period last year, sales decreased by 21.2%, and operating loss increased by 6.2%.
The total cumulative sales of the MC Business Division in 2019 amounted to 5.96 trillion KRW, down about 2 trillion KRW from the previous year. Operating losses totaled 1.01 trillion KRW, increasing by approximately 200 billion KRW from 789 billion KRW the previous year.
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