LG Electronics Mobile to Withdraw by Late July After 24 Consecutive Quarters of Losses: "Reallocating Workforce"

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[Asia Economy Reporter Joselgina] LG Electronics' MC Business Division, which will withdraw from the smartphone business in July, recorded losses for 24 consecutive quarters. LG Electronics plans to actively utilize smartphone-related technology patents in smart home appliances, new products based on the Internet of Things (IoT), connected cars, and other automotive electronics businesses.

On the 29th, LG Electronics announced that the MC Business Division, responsible for mobile business, posted Q1 sales of 998.7 billion KRW and an operating loss of 280.1 billion KRW. This marks 24 consecutive quarters of losses. Sales were similar to the same period last year, but the operating loss widened compared to the previous year. LG Electronics explained, "Sales are similar to last year, but intensified global market competition increased operating losses." Price declines due to sales focused on older models also had an impact.

From Q2, the MC Business Division’s performance will no longer be reflected in operating profit but will be accounted for as discontinued operation losses. Earlier, LG Electronics announced that it would completely cease production and sales activities of the MC Business Division by the end of July. Product manufacturing will continue until the end of May. Currently, LG Electronics is planning workforce reallocation, disposal of tangible and intangible assets, compensation for business partners and suppliers, and customer after-sales service measures.

During the conference call following the earnings announcement, Seo Dong-myeong, LG Electronics MC Management Officer, responded to questions about the reallocation of 3,700 employees belonging to the existing MC Business Division and the related cost burden by saying, "It is difficult to estimate exact costs at this point," adding, "It will be finalized according to the scale of workforce reallocation by each division, but the scale of reallocation has not yet been completed."

He stated, "The principle is to prioritize the individual preferences of employees for relocation, and reallocation is currently underway to maintain employment with the goal of securing the group’s future value," emphasizing, "The level of burden on profit and loss management by each division is not significant."

LG Electronics will continue research and development (R&D) on core mobile technologies such as 6G, independently of the smartphone business termination. The core technology patents held by the MC Business Division will also be utilized internally within LG Electronics for smart home appliances, IoT-based new product development, and more.

Seo explained, "Core patent assets of the smartphone business will be actively used in the development of smart home appliances and IoT-based new products," adding, "Some patents are connected to automotive connectivity core technologies and the telematics, display video, and infotainment businesses of the automotive electronics (VS) division." He further stated, "Although a business model utilizing the patent assets themselves has not been finalized at this point during the MC Business termination process, we will communicate with the market once possibilities are reviewed and concretized."

Meanwhile, LG Electronics posted record-high sales and operating profit for Q1 on a consolidated basis. Consolidated sales for Q1 2021 were 18.8095 trillion KRW, and operating profit was 1.5166 trillion KRW. The operating profit margin was the highest ever for a Q1 at 8.1%.

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