[LG Phone Withdrawal] Boldly Cutting 'Minus'... Koo Kwang-mo Focuses on Electric Vehicles, AI, and Robots

LG Group Accelerates Structural Reform... MC Division Records 23 Consecutive Quarters of Losses
VS Business Unit in Charge of Automotive Electronics Expected to Turn Profitable in Second Half of This Year
Core Area of Group's Digital Transformation... Over 4 Trillion Won Invested in Last 5 Years
About 3,700 MC Division Employees Likely to Be Reassigned to Key Businesses Like Automotive Electronics

[Asia Economy reporters Seulgina Jo and Heungsun Kim] On the morning of the 5th, LG Electronics made a bold decision to withdraw from the smartphone business at its board meeting, accelerating LG Group’s structural reform in the fourth year of Chairman Koo Kwang-mo’s tenure. Under Chairman Koo’s management directive, which prioritizes customer value, unprofitable businesses will be streamlined, and the group will transform with a ‘selection and concentration’ strategy that strengthens core businesses such as automotive components, artificial intelligence (AI), and robotics. This approach is expected to be maintained in key matters such as investment and personnel allocation.

◆ Closing the 'deficit' phone business and expecting profits in automotive components

Smartphones and automotive components represent LG’s present and future. Although both business units have experienced losses around the time Chairman Koo took office in June 2018, internal assessments of growth potential have been completely different.

LG Electronics’ Mobile Communications (MC) Business Division recorded negative growth for 23 consecutive quarters from Q2 2015 through Q4 last year, accumulating losses of 5 trillion won. In contrast, the Vehicle Components (VS) Business Division, responsible for automotive components, suffered losses for 20 consecutive quarters starting from Q1 2016, but reduced its operating loss from over 200 billion won in Q2 last year to 2 billion won in Q4. It is expected to turn profitable in the second half of this year.

At the LG Group level, the automotive components business is a core area of the ‘digital transformation’ ordered by Chairman Koo. Through LG Energy Solution, spun off from LG Chem, as well as 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 that maximizes synergy through strategic collaboration among key affiliates.

LG Electronics has also been actively investing. Over the past five years, it has invested more than 4 trillion won in the VS Business Division, an amount comparable to that of its mainstay Home Appliance & Air Solution (H&A) division. As of Q4 last year, the VS Business Division’s sales reached 1.9146 trillion won, already surpassing the MC Business Division. According to the financial investment industry, the VS Business Division’s share of LG Electronics’ total sales exceeded 10% last year and is expected to expand further.

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

◆ The first year of ‘New LG,’ accelerating business restructuring

With the withdrawal from the smartphone business and the strengthening of automotive components, AI, and robotics, this year is expected to be the inaugural year of ‘New LG,’ as declared by Chairman Koo. ‘LG Magna e-Powertrain,’ a joint venture (JV) established with Magna International, the world’s third-largest automotive parts supplier, specializing in electric vehicle powertrains, received approval for a spin-off at the shareholders’ meeting and will officially launch in July. Last month, ‘Aluto,’ a JV related to the in-vehicle infotainment platform business, was launched with Luxoft, a global software company headquartered in Switzerland. Earlier, in 2018, LG acquired ZKW, an Austrian manufacturer of vehicle headlamps, laying the foundation for its automotive components business.

Additionally, the Robot Business Center, established after Chairman Koo’s inauguration, was incorporated last year into the Business Solutions (BS) division?one of LG Electronics’ five main business units (H&A, HE, MC, VS, BS)?to strengthen its capabilities. This center will focus on robots easily accessible in daily life and plans to offer customized solutions for hotels, hospitals, and food & beverage (F&B) sectors. In the AI field, the ‘LG AI Research Institute’ was launched earlier this year, involving 16 affiliates including LG Electronics, LG Display, and LG Chem. The market expects LG Electronics to pursue additional mergers and acquisitions (M&A) or JV establishments in automotive components, AI, and robotics following the smartphone business withdrawal.

Internally and externally, attention is focused on the future of approximately 3,700 employees belonging to LG Electronics’ MC Business Division. Since the company has already pledged to guarantee employment, industry insiders believe that reallocating personnel to core businesses such as automotive components is a likely option. An LG Electronics official stated, “Sufficient discussion and review are needed regarding where and how to assign existing employees,” adding, “We plan to conduct interviews with the affected employees and make careful decisions.”

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