South Korea’s LG Electronics stated on Wednesday it was contemplating all choices for its loss-making cellular division, which analysts stated might embody shutting its smartphone enterprise or promoting off components of the unit.
Shares in LG closed up 12.8%, towards an increase of 0.7% within the broader KOSPI index.
“In the global market, competition in the mobile business including smartphones has gotten fiercer,” LG stated within the clearest signal but that it could possibly be contemplating a winding down of the troubled enterprise.
“LG Electronics believes we have reached the point where we need to make the best decision about our mobile phone business, considering current and future competitiveness.”
LG shakes up loss-making cellphone enterprise, to outsource lower-end fashions
Chief Government Brian Kwon stated the corporate deliberate to retain workers no matter what occurred to the cellular unit.
Though ranked No. 3 within the international smartphone market within the first quarter of 2013 by Technique Analytics, LG was not even among the many prime seven within the third quarter of 2020 after shedding floor to Chinese language makers, analysis agency Counterpoint stated.
Analysts stated that if LG decides to wind down the cell phone enterprise, it could enhance its market capitalisation by an estimated 4 trillion received, as greater than 5 years of cumulative losses and misallocation of assets had weighed on valuation.
Battery-powered face masks seeks to combat Covid and foggy glassesEnding its cellular enterprise might additionally assist LG give attention to increasing in automobile components, the place it not too long ago launched a three way partnership with automotive provider Magna Worldwide to make electrical automobile parts.
“(LG’s) mobile business has done everything possible to reduce cost,” Ko Eui-young, an analyst at Hello Funding & Securities, stated.
“Now the company is at a point where it needs to increase sales by taking market share from Samsung and Apple, but that’s not seen as too feasible, which makes it difficult for the business to improve its loss-making situation.”
Final month, LG stated it had reorganised its cell phone division to extend outsourcing of its low to mid-end smartphones, which analysts stated represented an try to chop prices.