LG outsources loss-making mobile phone business to focus on high-end devices
LG is hoping to turn its mobile phone business aroundBy Shawn Knight 14 comments
Editor's take: LG Electronics addressed its loss-making mobile phone division on Monday with a massive restructuring that impacts virtually every facet of the business. Some may say that it's a case of too little, too late, or that it is a last-ditch effort (neither of which may be wrong), but at least they are taking steps to address the matter.
The company confirmed to Reuters that it will be outsourcing low and mid-range handsets to an original design manufacturer (ODM). This simply means that a third-party company will design and manufacture devices and LG will slap their branding on the resulting products.
A spokesperson further told Reuters that some research and production positions had also been eliminated, while others have been reshuffled. The moves should help the company better focus its efforts on building premium smartphones like the recently launched LG Wing.
The South Korean electronics maker was once among the top three smartphone makers in the world, but that was many moons ago. Today, the company isn't even in the top seven. According to the publication, LG's mobile business has reported an operating loss for 22 straight quarters.
Tom Kang, an analyst at research firm Counterpoint, said LG is trying to add to its lower-end models' value for the price by using ODMs. "But even if LG sources its products, without marketing ability, it cannot win against Chinese firms who are good at it," Kang added.
Masthead credit: Grzegorz Czapski