LG Elec folding mid to lower-end phone biz, investors cheer with stock 13% up

Hong Sung-yong, Park Jae-young and Hye-seung Seo 2021. 1. 20. 21:15
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South Korea’s LG Electronics Co. is rationalizing its smartphone business which has been hurting the bottom line for the world’s top white goods maker for the last six years by folding lower-to mid-end phone business.

The stock soared Wednesday to finish 12.8 percent higher at 167,000 won ($151.6) after rumors spread it was phasing out of mobile phone business.

The rumor was triggered by an email to employees in the mobile division by CEO Kwon Bong-seok who said, “The moment of truth has arrived to coolly judge competitiveness.” Although “all options were open”, Kwon assured that no employees in the division should be worried about their employment status.

[Photo provided by LG Electronics Inc.]
The company has denied complete withdrawal of smartphone business as it is readying to turn out ambitious rollable phone after teasing a glimpse of its new innovation at the CES virtual convention last week.

It is said to be devising rationalization of its business by keeping high-end OLED premium phone and some mid-tier phones popular in North America and Europe while spinning off the lower-end phones for sale. Manufacturing lines spread out in Vietnam, China, Brazil and India would have to be separately sold.

Possible buyers are Vietnamese conglomerate Vingroup which is eager to upscale its phone business and Facebook expanding phone-based multi-factor authentication options for its platform.

One industry source said Vingroup is hungry for premium phone manufacturing and will be interested in LG Electronics smartphone base which has moved out to Vietnam in 2019 from Pyeongtaek in Korea.

LG’s s smartphone division has not made a profit since the second quarter of 2015 and cumulative net loss has reached around 5 trillion won ($4.5 billion) by the end of last year, spoiling the company’s best-ever performance in 2020 with operating profit exceeding 3 trillion won milestone for the first time.

LG instead would be focusing resources on premium home appliance and automotive electronics.

LG Electronics last month announced a $1 billion joint venture with Canadian automotive supplier Magna International to build up economies of scale and competitive edge in auto electronics which will make up the bulk of future mobility along with batteries.

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