'Apunsongarak' Smartphone Business Adjustment
Final Steps to Complete Restructuring Initiated After Inauguration
High Possibility of Reorganization Through Strengthened Future Business Investment
[Asia Economy Reporter Kim Heung-soon] As LG Electronics announced its intention to thoroughly review its smartphone business, which has suffered losses for several years, the ‘selection and concentration’ strategy of LG Group Chairman Koo Kwang-mo (face) is drawing renewed attention. If the smartphone business, considered a ‘painful finger,’ is adjusted, it means that the business restructuring efforts pursued by Chairman Koo since his inauguration in 2018 are effectively entering their final stages.
An LG Group official said on the 21st, "There is a consensus within the group that the smartphone business is difficult to continue as it is, but the specific operational direction is a matter to be decided by LG Electronics, which oversees the Mobile Communications (MC) Business Division," adding, "Once the plan is finalized, it will be confirmed after discussions with the holding company, but no decisions have been made yet regarding withdrawal or sale of the business, as some have suggested."
This emphasized that regardless of Chairman Koo’s intentions, the continuation of the business is being carefully considered based on the judgment of LG Electronics’ president and management. However, considering LG’s precedent since Chairman Koo’s inauguration in May 2018?boldly restructuring non-core or unprofitable businesses by subsidiary and strengthening investments in future businesses?it is highly likely that the smartphone business will also be reorganized in a direction that reflects Chairman Koo’s strategy.
Previously, LG Chem sold its LCD polarizer business to a Chinese company in June last year and liquidated its fuel cell subsidiary LG Fuel Cell Systems, which had been invested in for next-generation fuel cell development in February 2019, thereby streamlining non-core businesses. In April of the same year, LG Display withdrew from the lighting OLED business, and in July, LG Electronics sold its water treatment management and operation company High En Tech and environmental facility design and construction company LG Hitachi Water Solutions. In November, LG Innotek also exited the smartphone mainboard (HDI) business, which had been running at a loss.
Instead, in July 2018, LG Electronics acquired management rights of Robostar, an industrial robot manufacturer, and in December last year, established a joint venture (JV) with Magna International, the world’s third-largest automotive parts company, investing in the robotics and future car sectors. On the 7th of this month, 16 affiliates including LG Electronics, LG Display, LG Chem, LG Uplus, and LG CNS launched the ‘LG AI Research Institute,’ an AI-dedicated organization, demonstrating their intention to strengthen AI business. In this context of changing core businesses, it appears that continuing the loss-making smartphone business in its current form is deemed difficult. LG Electronics’ MC Business Division has posted losses for 23 consecutive quarters from the second quarter of 2015 to the fourth quarter of last year, accumulating losses amounting to 5 trillion won.
An LG Group official drew a line, saying, "There is a consensus on LG Electronics’ judgment that it is time to coldly assess the current and future competitiveness of the (mobile) business, but all other options are still under consideration with possibilities in mind."
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