‘Aching Finger’ LG Smartphone, 23 Consecutive Quarters of Losses... Last Year’s Cumulative Loss of 840 Billion Won

[Asia Economy Reporter Koo Eun-mo] LG Electronics' MC Business Division, which is in charge of the smartphone business, has recorded losses for 23 consecutive quarters. The MC Business Division, which is currently reviewing various restructuring plans including a potential sale, has continued to struggle due to a decline in premium smartphone sales and difficulties in parts supply.

LG Electronics announced on the 29th that the MC Business Division, responsible for the smartphone business, posted sales of 1.385 trillion KRW and an operating loss of 248.5 billion KRW in the fourth quarter of last year. This marked 23 consecutive quarters of losses since the second quarter of 2015. On an annual basis, both sales and operating losses decreased. The cumulative sales of the MC Business Division last year were 5.2171 trillion KRW, down about 700 billion KRW from 5.96 trillion KRW in 2019. The cumulative operating loss was 841.2 billion KRW, about 150 billion KRW less than 1.01 trillion KRW in 2019.

In the fourth quarter, the MC Business Division was affected by a decline in premium smartphone sales and an unstable supply of chipsets used in 4G smartphones, impacting sales and profitability. Due to sluggish smartphone shipments, the operating loss exceeded 200 billion KRW again after one quarter, expanding compared to 148.4 billion KRW in the third quarter. Chinese companies such as Oppo, Vivo, and Xiaomi aggressively procured components like APs, making it difficult to secure key parts.

As the possibility of withdrawing from the smartphone business has recently become public, no specific plans or forecasts for this year's business outlook were presented. LG Electronics stated, "We believe it is time to make the best choice by objectively assessing the current and future competitiveness of the MC Business Division's mobile business," and added, "We are carefully reviewing all possible options for business operation." Earlier, LG Electronics President Kwon Bong-seok acknowledged the possibility of withdrawal in an official email sent to the MC Business Division on the 20th, stating, "We are reviewing business operation directions with all possibilities open."

It is widely assessed that LG Electronics' smartphone business has reached its limits and that a strategic decision point has arrived. Over six years since 2015, it has recorded an operating loss of 4.7 trillion KRW, and the industry estimates that the loss scale, including common costs, is even greater.

Ko Jung-woo, a researcher at NH Investment & Securities, said, "There was no reflective benefit from the worsening environment of Huawei's smartphone business in China last year, and there was no performance improvement from the launch of the new form factor smartphone ‘LG Wing,’ so the outlook on the smartphone business has to be conservative," adding, "The potential growth rate that LG Electronics, which can be seen as a niche player, can enjoy has decreased compared to the past, and it is difficult to expect a turnaround opportunity."

Kim Ji-san, head of the Kiwoom Securities Research Center, also said, "Since the second half of last year, the sales performance of strategic models Velvet and Wing has been poor, and with the 5G momentum past its peak, LG's position in the premium phone market has further shrunk, with limited additional options," and assessed, "The rollable phone, which attracted attention at CES, seems sufficient to demonstrate advanced technology, but it is unlikely to be reflected in meaningful sales volume and results."

This content was produced with the assistance of AI translation services.