LG Electronics is sometimes incessantly posed questions from outsiders as to why it holds on -- so fervently -- to its money-losing smartphone business. For the tech giant, smartphones are more than just a number, they are key to the new mobility era.
However, the books look far from rosy. LG Electronics’ handset unit has suffered operating losses for seven straight quarters, with a cumulative operating loss of 1.2 trillion won ($1.05 billion) last year alone.
Experts say the situation may not turn around so easily due to LG’s “sandwich-position” in the already saturated smartphone market between premium phones -- from Samsung and Apple -- and growing Chinese low-budget devices.
“From the perspective of economies of scale, things are not good for LG to make hardware innovation. While Samsung and Apple can make hardware investments -- such as in curved or foldable devices -- amounting to a few trillion won, it is hard for LG, with much fewer clients,” KAIST College of Business professor Lee Byung-tae told The Korea Herald.
“But smartphones are imperative for the future mobility era in terms of the smart home and Internet of Things,” he added.
Kim Jong-ki, director at the Korea Institute for Industrial Economics & Trade’s ICT & emerging industry division, said, “Smartphones with new functions such as artificial intelligence technology and Internet of Things will create a new market in the fourth industrial revolution with the mobile network shifting from 4G to 5G.”
The experts’ remarks are in line with LG Electronics’ CEO Jo Seong-jin, who also said at the latest consumer electronics show the company would not give up smartphones and would make a turnaround this year. The mobile communications unit is what will act as a point of cohesion for home appliances that are becoming more complex and smarter, he said.
LG recently launched smart home appliances controlled either by its Hub Robot or smartphones.
LG said, “We plan to continue to invest in the handset business because its communications technologies are deeply linked with other businesses such as smart home and vehicle components.”
Other experts pointed to smartphone’s symbolic significance as to why the tech firm continues with this business.
“It is not easy for LG to take the risk of ditching smartphones because the device is symbolic. Smartphones, unlike home appliances or vehicle components, are portable, meaning it is a very powerful tool to raise a brand’s profile among consumers,” said Yeo Joon-sang, a professor at Dongguk University’s business college.
“LG is now betting big on the G6, which could become a big turning point in the company’s building of a more positive brand image,” Yeo said.
LG is slated to unveil its new flagship smartphone G6 at the upcoming Mobile World Congress, which kicks off Monday.
By Shin Ji-hye (shinjh@heraldcorp.com)
