"Day of Destiny Dawns" LG Electronics Likely to Announce Smartphone Withdrawal Today

The LG Twin Towers in Yeouido, Seoul, where LG Electronics' headquarters is located, on the 2nd, as LG Electronics' exit from the smartphone business approaches. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Joesulgina] The fate of LG Electronics' smartphone business is expected to be finally decided on the 5th. It has ultimately settled on withdrawing from the smartphone business.

According to industry sources on the 5th, LG Electronics will hold a board meeting on the day to announce the future business plan of the MC Business Division, which is in charge of the smartphone business. With no progress in business sales, the focus is shifting toward withdrawal. This comes about two months after LG Electronics officially announced a full review of its smartphone business on January 20.

LG Electronics had been pursuing the separate sale of smartphone production bases to overseas operators, but with no progress, it has settled on voluntary withdrawal. It is known to have contacted Vietnam's Vingroup, Germany's Volkswagen, Facebook, Google, and others, but negotiations did not make significant progress.

LG Electronics' withdrawal from the smartphone business is regarded as a virtually anticipated step. The MC Business Division, responsible for mobile business, has posted operating losses for 23 consecutive quarters from Q2 2015 through Q4 last year. The cumulative operating loss until the end of last year reached a total of 5 trillion won. Additionally, the global smartphone market share remained stagnant in the single digits. In the premium market, it was overshadowed by Samsung Electronics and Apple, and in the mid-to-low-end market, it was beaten by Chinese manufacturers leveraging price competitiveness, resulting in a market share of just around 2%.

It is reported that LG Electronics has already begun preparations for the redeployment of approximately 3,700 employees in the MC Business Division. Earlier, when announcing the business restructuring, LG Electronics confirmed, "Regardless of how the business operation direction is decided, employment will be maintained in principle." These employees are expected to be reassigned soon to other business divisions or affiliates such as LG Uplus, LG Energy Solution, and LG Magna e-Powertrain, which is scheduled to launch in July.

The decision to redeploy MC Business Division personnel to the Vehicle Components Business Division, LG Magna e-Powertrain, LG Energy Solution which produces smartphone batteries, and others is interpreted as a commitment to internalize the core proprietary technologies, intellectual property (IP), and patents accumulated in the mobile business. LG Electronics is said to be focusing on directions that create synergy with future businesses during this process.

Along with withdrawing from the smartphone business, LG Electronics is expected to accelerate the reorganization of its business portfolio. It is widely anticipated that the company will concentrate its capabilities on AI-based home appliances and future vehicle electronic components, while expanding new businesses such as robotics. The market expects LG Electronics to soon engage in additional mergers and acquisitions (M&A) or joint ventures in areas like vehicle components, AI, and robotics.

If the withdrawal from the smartphone business is confirmed at the board meeting on the day, LG Electronics will also announce its after-sales support policy for existing consumers. An LG Electronics official said, "We will make thorough preparations to ensure that consumers do not suffer any disadvantages regardless of the decision."