How’s LG smartphone segment ‘doing’ with rumors of being sold soon?

Vingroup will buy LG’s smartphone business?

Recently, Korean media have repeatedly reported that LG is planning to sell its smartphone business. Accordingly, the Korean electronics company is negotiating to sell this business segment to Vingroup.

According to Business Korea, there are some partners offering to buy LG Electronics’ mobile division, but Vingroup offers the most attractive offer. Currently, the subsidiary VinSmart is also the ODM partner (doing design work, creating products according to the design of the customer) of LG, so the negotiation can be more favorable.

If successful in this deal, Vingroup can absorb some of LG’s advanced technologies, know-how, sales network and brand value.

In addition, Vingroup can own more manpower of the R&D center and manufacturing plant in Latin America managed by LG. However, LG’s smartphone factory in Vietnam is not in the target of acquisition.

“VinSmart is currently the third largest smartphone maker in Vietnam, after Samsung Electronics and Oppo. If it buys the phone business from LG Electronics, it can make a significant leap. Reputation, technology. LG’s modernity and sales network can bring innovation to Vingroup, “writes Business Korea.

Cumulative loss of $ 4.5 billion over the past 5 years

LG Electronics CEO Kwon Bong-seok sent employees e-mails to reassure the future of the mobile business, and pledged to secure employment when restructuring the division.

“As the competition in the global market for mobile devices is getting fiercer, it’s time for LG to be decisive and make the best choice,” explained an LG official. possible measures, including selling a part, all or reducing the size of the smartphone business “.

In fact, in the past five years, LG’s smartphone business has had many difficulties competing with its ‘heavyweight’ competitors. This resulted in the company suffering a cumulative loss of 5,000 billion won ($ 4.5 billion).

By the end of 2014, LG shipped 60 million smartphones and held 11% of the global smartphone market share, ranking third behind Apple and Samsung, according to Consumer Intelligence Research Partners data. However, this is also the last time that LG’s smartphone business has been fully profitable.

As of 2020, this business segment of LG has suffered losses for 23 consecutive quarters, since the second quarter of 2015. In the third quarter of 2020, the smartphone business’s operating loss was 148.4 billion won, narrowing from 206.5 billion won in the first quarter and 237.8 billion won in the second quarter.

After taking office, LG Electronics CEO Kwon Bong-seok announced that he would make a difference in the smartphone business by 2021.

“The company is improving the bottom line of the smartphone business by cutting costs and will look for growth in the premium market next year,” Kwon said.

Last year, LG made a bold decision to abandon its G series smartphone brand and start new smartphone projects. The company has launched an ambitious project called “Explorer Project”, which aims to create a phone catalog with unique designs.

Through this project, LG released the Wing phone – a smartphone with two screens. LG Electronics also plans to launch a smartphone with a rollable OLED display in the second half of this year.

Despite the efforts, though, LG’s presence in the global smartphone market has gradually declined. Its share in the global market is about 2%. In addition to being dominated by Samsung and Apple in the high-end segment, LG is also having trouble stumbling with Chinese rivals in the affordable segment.

In its home country of Korea, LG is the third-largest manufacturer in 2020 with a 13% market share, according to research firm Counterpoint. Samsung leads with 65%, followed by Apple with 21% market share. In the third quarter of 2020, LG shipped 6.5 million smartphones, down sharply from 7.2 million for the same period in 2019.