LG indicates it may withdraw from mobile industry despite favorable reviews of Rollable smartphone

President sends letter to employees saying their jobs are safe

The LG Rollable smartphone

All 3,700 employees working in LG Electronics’ mobile communications (MC) division received an email on Jan. 20. It was a brief letter from co-CEO and President Brian Kwon Bong-seok.

“Whatever decisions are made concerning the direction of the MC division’s management of projects, there is no cause for concern, as we will maintain our staff’s employment as a rule,” he wrote. His message indicated a potential withdrawal from the mobile sector. Soon afterward, the company issued a press release in which it said it was “considering every possibility as we closely examine the direction of our mobile business operation.”

Shortly after the news hit, LG Electronics share prices began to spike, closing the day at 167,000 won (US$152) — a 12.84% rise from the day before.

The company continues to caution against hasty conclusions, insisting that “every avenue is open.” An LG Electronics spokesman said, “The recent explosion of rumors surrounding the direction of our mobile business has caused commotion among our employees, and Mr. Kwon made it clear today that he intends to keep them on board.”

“We are examining different approaches for the direction of project management, but nothing has been decided,” the official insisted.

But this marks the first time the company has publicly used phrases such as “leaving every possibility open,” “making objective determinations,” and “time to make the optimal choice” in discussing the fate of its mobile division. Its smartphone sector has been dogged for the past 10 years by an ignominious history of humiliation.

LG Electronics’ MC division recorded operating losses for the 23 straight quarters between the Q2 2015 and the Q4 2020. As of late 2020, its cumulative operating losses totaled some 5 trillion won (US$4.55 billion). As smartphone sales declined from one year to the next, it appears to have even weighed a selloff.

In recent years, total sales for the MC division have undergone a steep decline: from 14 trillion won (US$12.7 billion) in 2015 (24.8% of LG Electronics’ sales) to 11.7 trillion won (US$10.7 billion) in 2016 (21.1%), 11.2 trillion won (US$10.2 billion) in 2017 (18.2%), 8 trillion won (US$7.3 billion) in 2018 (13.0%), and 6 trillion won (US$5.5 billion) in 2019 (9.6%). As sales have shrunk, so too has the number of employees in the division — from 6,761 in 2016 all the way down to 3,719 as of September 2020.

Many are now watching to see what impact this will have on the market. LG Electronics is ranked among the top 10 companies in the global smartphone industry with a market share in the 1-2% range. It has been vastly overshadowed in the premium phone market by Apple and Samsung Electronics; at the lower end, it has been crowded out of the market amid an onslaught of Chinese businesses like Huawei, Xiaomi, and Oppo.

LG’s pre-smartphone success

Before the days of smartphones, LG racked up some impressive achievements. At one point, it passed Motorola to rank third in the global market behind Nokia and Samsung. In 2006, it had a smashing success with its Chocolate phone (6.5 million units in annual sales). It followed that up with other hit items like the Shine, Viewty, and Prada, scoring annual sales of more than 100 million units.

But a little over a decade ago, the smartphone revolution arrived with the release of the iPhone. Whether it has been because of underestimation or a failure to adapt, LG Electronics has fallen so far in stature that it is now difficult to even spot in global market share figures. Its repeated attempts at a comeback during its “lost decade” all failed, and the company ended up enduring 23 straight quarters of losses.

On Jan. 20, the market answered by propelling a rise in the same LG Electronics share prices that had been weighed down by those mobile division losses over the past six years. The decision on the project’s operations is seen as likely to cause setbacks in the ambitious plans for launching rollable phones announced on Jan. 11 at the 2021 CES international trade show.

By Cho Kye-wan, staff reporter

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