LG mulls options for troubled smartphone unitLG mulls options for troubled smartphone unit

South Korea's LG Electronics is considering what to do with its loss-making mobile communications business after efforts to shake up the unit appear to have been unsuccessful.

It seems that the manufacturer is looking at various options, which could include shutting its smartphone business or selling off parts of the unit.

According to Reuters, LG said that 23 consecutive quarters of losses in its mobile business had totaled around 5 trillion won (US$4.5 billion).

"In the global market, competition in the mobile business including smartphones has gotten fiercer," LG said in a statement.

Figure 1: Brave face: LG is reportedly considering shuttering its handset unit.
(Source: LG)

"LG Electronics believes we have reached the point where we need to make the best decision about our mobile phone business, considering current and future competitiveness."

No mention was made of the effects of COVID-19, although it seems highly likely that the pandemic has contributed towards the mobile unit's woes.

Ko Eui-young, an analyst at Hi Investment & Securities, told Reuters that LG is "at a point where it needs to increase sales by taking market share from Samsung Electronics Co Ltd and Apple Inc, but that's not seen as too feasible, which makes it difficult for the business to improve its loss-making situation."

The Yonhap news agency reported that LG's mobile business narrowed its operating losses to 148.4 billion ($134 million) won in the third quarter of 2020, but noted that the mobile business has been in the red since the second quarter of 2015.

Sales were up 16.5% compared to the previous quarter, thanks to a recovery in global demand for mobile phones.

According to Yonhap, the vendor has said it would target European and Central and South American markets with 5G and budget phones to capitalize on areas where US sanctions have affected Huawei.

LG recently launched a joint venture with automotive supplier Magna International to make electric car components, and may decide to focus more on this area in future.

Tumbling down

The South Korean vendor has suffered mightily from the rise of highly competitive smartphone manufacturers from China in recent years.

In 2013, Strategy Analytics ranked LG as the world's fourth-largest mobile phone vendor, capturing 4% market share thanks to its Optimus range of Android smartphones. Samsung, Nokia and Apple occupied the top three positions at the time.

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Fast forward to 2020, and the situation is somewhat different: LG was no longer among the top five in the first quarter of the year. Samsung was in the lead, followed by Huawei, Apple, Xiaomi and Oppo.

According to Counterpoint Research, LG was not even among the top seven global smartphone markets in the third quarter of 2020. Samsung was again in first place, followed by Huawei, Xiaomi, Apple, Oppo, Vivo and Realme.

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— Anne Morris, contributing editor, special to Light Reading