LG Electronics is reportedly considering selling its smartphone business. LG Electronics CEO Kwon Bong-seok announced his position by sending e-mails to executives and employees regarding the withdrawal of mobile businesses on Jan. 20.
"The deficit in the mobile business has continued so far, and it is time to make the best choice by calmly judging the competitiveness of the mobile business," CEO Kwon said. "We are closely reviewing the direction of the business while leaving all possibilities open."
"No matter how the direction of business operation is set, the employment of members will be maintained in principle," he added. "There is no need to be anxious." LG Electronics is planning to decide whether or not to sell its mobile business soon.
"We concluded that it is difficult for LG Electronics to continue its mobile business such as smartphones that have been in deficit internally," said an industry official. "We understand that LG Electronics is looking for a buyer with more emphasis on selling its mobile business."
MC Business Headquarters, which is in charge of LG Electronics' smartphone, tablet, and wearable businesses, has been posting losses for 23 consecutive quarters since the second quarter of 2015, and accumulated operating losses have reached 5 trillion won ($4.5 billion) until last year.
Its market share in global smartphone markets was only ranked 10th with 1% of market share. In the premium phone market, it is losing ground to Apple and Samsung Electronics, and in the mid- to low-priced phone market, it is losing ground to the Chinese companies such as Huawei and Xiaomi.
LG Electronics' mobile business grew as it released successful works such as chocolate phones, shine phones, and Prada phones until the mid-2000s when it was a feature phone era.
Although it had been expected to introduce Rollable Phone until recently, LG Group has begun to organize its business by focusing its capabilities and resources on core businesses leading the global market rather than continuing its deficit business.
Currently, LG Electronics is pushing to sell its entire mobile division first, but it is also considering ways to reduce the size of MC Business Headquarters' organization and absorb it into other business headquarters, maintain some premium smartphones, and increase OEM production.
If MC Business Headquarters is reduced or sold, H&A Business Headquarters in charge of household appliances such as refrigerators and washing machines, HE Business Headquarters in charge of TVs, and VS Business Headquarters in charge of automobile parts will be LG Electronics' main areas.
On the other hand, securities firms raised LG Electronics' target stock price to around 200,000 won per share due to news that LG Electronics is planning to sell its mobile business.
By securities company, Samsung Securities, Korea Investment & Securities and Eugene Investment & Securities raised LG Electronics' target share price to 220,000 won.
Samsung Securities, which raised its target price of LG Electronics from 170,000 won to 220,000 won, said, "The decision to focus its resources on electric vehicle parts will trigger a hike in stock prices. Especially, selling mobile businesses that have not escaped from chronic deficits will have positive effects."
"We believe that Kwon's remarks that he is considering the direction of his business while leaving all possibilities open for mobile businesses mean the withdrawal, sale or reduction. Mobile division's operating loss in 2020 is estimated to be 838 billion won and it has a significant impact on LG Electronics' overall operating profit of 3.2 trillion won.
