[LG Phone Withdrawal] Accelerating Business Restructuring... Focusing on 'Automotive Electronics and AI' Instead of Unprofitable Smartphones

The LG Twin Towers in Yeouido, Seoul, where LG Electronics' headquarters is located, on the 2nd, as LG Electronics' exit from the smartphone business approaches. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Seulgina Cho] LG Electronics has confirmed its withdrawal from the smartphone business, which has accumulated losses exceeding 5 trillion won, after much deliberation, accelerating its portfolio restructuring. While focusing its capabilities on AI-based home appliances and future car electronic components, it is also expected to expand new businesses such as robotics. These are areas that Koo Kwang-mo, Chairman of LG, has been focusing on as future growth engines since taking the helm of the group in 2018.

On the 5th, LG Electronics announced through a board resolution that it will cease operations of the MC Business Division, which manages the smartphone business. The MC Business Division's sales amounted to 5.2171 trillion won in 2020, accounting for 8.2% of the company's total sales. The company stated, "The intensifying competition in the mobile phone business and continuous business downturn are the reasons," adding, "We will focus our capabilities on core businesses through internal resource optimization and improve the business structure."

LG Electronics' exit from the smartphone business is interpreted as a strategic decision to boldly cut loss-making operations, improve financial structure, and concentrate capabilities on future growth businesses. The market expects LG Electronics to soon make additional investments such as mergers and acquisitions (M&A) or joint ventures in fields like automotive electronics, AI, and robotics.

LG Electronics' recent decision to establish a joint venture (LG Magna e-Powertrain) with the global automotive parts company Magna International also confirms its intention to nurture the future car electronic components business as a key growth driver.

Kwon Bong-seok, President of LG Electronics, announced plans to make 2020 the inaugural year of becoming a comprehensive automotive electronics company. The VS Business Division, responsible for automotive electronics, reduced its deficit to 200 billion won last year and aims to turn profitable this year. In particular, the market anticipates that LG Magna, launching in July, could receive a contract from Apple to produce the Apple Car.

At the group level, the automotive electronics sector is a core area of the "digital transformation" that Chairman Koo has emphasized. Through LG Energy Solution, spun off from LG Chem, LG Electronics, LG Innotek, and LG Display, the group has established a comprehensive system covering electric vehicle batteries, in-vehicle infotainment, powertrain, vehicle displays, and vehicle communication and lighting components. This creates a business environment where strategic collaboration among key affiliates can maximize synergy.

AI is the most representative technology area expected to create synergy with LG Electronics' competitive home appliance business. Prior to this, LG Group launched the "LG AI Research," an AI-dedicated organization involving 16 affiliates. This demonstrates the group's commitment to securing core AI technologies and expanding AI businesses through collaborative efforts. LG Electronics is also accelerating its capabilities by investing in AI solution startups such as Aimfuture.

Additionally, the robotics industry is considered a key future growth engine selected by LG Electronics. LG Electronics is positioning robotics as a pillar of its future business, focusing on robots that can be easily integrated into daily life, offering customized solutions for hotels, hospitals, and F&B (food and beverage) sectors.

In particular, LG Electronics plans to internalize core proprietary technologies, intellectual property (IP), and patents accumulated from its mobile business and utilize them in advancing these future new businesses. The MC Business Division has secured many core technologies necessary for manufacturing other products such as displays, earning it the reputation of a "repository of advanced technologies."

With LG Electronics' withdrawal from the smartphone business, the decision to transfer and redeploy MC Business Division personnel to the automotive electronics division, LG Magna, and LG Energy Solution, which produces smartphone batteries, is also seen as a commitment to internalizing core technologies.

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