South Korea's LG considering all options for loss-making mobiles

South Korea’s LG Electronics said on Wednesday it was considering all options for its loss-making mobile division, which analysts said could include shutting its smartphone business or selling off parts of the unit.

LG said in a statement that 23 consecutive quarters of losses in its mobile business had totalled around 5 trillion won ($4.5 billion) amid stiff competition.

Shares in LG closed up 12.8%, against a rise of 0.7% in the broader KOSPI index.

“In the global market, competition in the mobile business including smartphones has gotten fiercer,” LG said in the clearest sign yet that it could be considering a winding down of the troubled business.

“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.”

Chief Executive Brian Kwon said the company planned to retain employees regardless of what happened to the mobile unit.

Although ranked No. 3 in the global smartphone market in the first quarter of 2013 by Strategy Analytics, LG was not even among the top seven in the third quarter of 2020 after losing ground to Chinese makers, research firm Counterpoint said.

Analysts said that if LG decides to wind down the mobile phone business, it may increase its market capitalisation by an estimated 4 trillion won, as more than five years of cumulative losses and misallocation of resources had weighed on valuation.

Ending its mobile business could also help LG focus on expanding in vehicle parts, where it recently launched a joint venture with automotive supplier Magna International to make electric car components.

“(LG’s) mobile business has done everything possible to reduce cost,” Ko Eui-young, an analyst at Hi Investment & Securities, said.

“Now the company 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.”

Last month, LG said it had reorganised its mobile phone division to increase outsourcing of its low to mid-end smartphones, which analysts said represented an attempt to cut costs.

($1 = 1,100.6100 won)