LG Electronics
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Once a major name in smartphones, LG Mobile is now irrelevant — and still losing money
LG was once a stalwart of the smartphone industry — remember its collaboration with Facebook back in the day? — but today the company is swiftly descending into irrelevance.
The latest proof is LG’s Q1 financials, released this week, which show that its mobile division grossed just KRW 1.51 trillion ($1.34 billion) in sales for the quarter. That’s down 30% year-on-year and the lowest income for LG Mobile for at least the last eight years. We searched back eight years to Q1 2011 — before that LG was hit and miss with releasing specific financial figures for its divisions.
To give an indication of its decline, LG shipped more than 15 million phones in Q4 2015 when its revenue was 3.78 trillion RKW, or $3.26 billion. That’s 2.5 times higher than this recent Q1 2019 period.
Regular readers will be aware that LG mobile is a loss-making division. That’s the reason its activities — and consequently sales — have scaled down in recent years. But the losses are still coming.
LG put Brian Kwon, who leads its lucrative Home Entertainment business, in charge of its mobile division last November and his task remains ongoing, it appears.
LG Mobile recorded a loss of 203.5 billion KRW ($181.05 million) for Q1 which it described as “narrowed.”
It is true that LG Mobile’s Q1 loss is lower than the 322.3 billion KRW ($289.8 million) loss it carded in the previous quarter, but it is wider than one year previous. Indeed, the mobile division lost 136.1 billion KRW ($126.85 million) in Q1 2018.
LG said Mr. Kwon is presiding over “a revised smartphone launch strategy,” which is why the numbers are changing so drastically. Going forward, it said that the launch of its G7 ThinQ flagship phone and a new upgrade center — first announced last year — are in the immediate pipeline, but it is hard to see how any of this will reverse the downward trend.
LG Mobile is increasingly problematic because the parent company is seeing success in other areas, but that’s being countered by a poor-performing smartphone business. Last quarter, mobile dragged LG to its first quarterly loss in two years, for example.
Just looking at the Q1 numbers, LG’s overall profit was 900.6 billion KRW ($801.25 million) thanks to its home appliance business ($647.3 million profit) and that home entertainment business, which had a profit of $308.27 million. Its automotive business — which is, among other things, focused on EVs — did bite into the profits, but that is at least a business that is going places.
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Poor smartphones sales drag LG to first quarterly loss in 2 years
We’ve written extensively about LG’s struggling mobile business, which has suffered at the hands of aggressive Chinese Android makers, and now that unit has dragged its parent company into posting its first quarterly loss for two years.
The Korean electronics giant is generally in good health — it posted a $2.4 billion profit for 2018 — but its smartphone business’s failings saw it post a loss in Q4 2018, its first quarterly negative since Q4 2016.
Overall, the company posted a KRW 75.7 billion ($67.1 million) operating loss as revenue slid seven percent year-on-year to KRW 15.77 trillion ($13.99 billion). LG said the change was “primarily due to lower sales of mobile products.”
We’ve known for some time that LG’s mobile business is struggling — the division got another new head last November — but things went from bad to worse in Q4. LG Mobile saw revenue fall by 42 percent to reach KRW 1.71 trillion, $1.51 billion. The operating loss for the period grew to KRW 322.3 billion, or $289.8 million, from KRW 216.3 billion, $194 million, one year previous.
Over the full year, LG Mobile posted a $700 million loss (KRW 790.1 billion) but the company claimed things are improving thanks to “better material cost controls and overhead efficiencies based on the company’s platform modularization strategy.”
LG used CES to showcase a range of home entertainment products — that division is doing far better than mobile, with a record annual profit of $1.35 billion in 2018 — so we’ll have to wait until Mobile World Congress in February to see exactly what LG has in mind. Already, though, we have a suggestion, and it isn’t exactly set-the-world-on-fire stuff.
“LG’s mobile division will push 5G products and smartphones featuring different form factors while focusing on key markets where the LG brand remains strong,” the company said in a statement.
It will certainly take something very special to turn things around. It seems more likely that LG Mobile head Brian Kwon — who also heads up that hugely profitable home entertainment business — will focus on cutting costs and squeezing out the few sweet spots left. Continued losses, particularly against success from other units, might eventually see LG shutter its mobile business.
Still, things could be worse for LG — it could be HTC.
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LG retains confidence in its mobile business despite continued losses
LG remains confident that it can turn the corner for its serially unprofitable mobile business despite the division racking up a loss of over $400 million this year so far.
The Korean company as a whole is having a good year. Following a record six months of profit and revenue in the first half of 2018, the group saw Q3 revenue jump 2.7 percent sequentially to reach 15.43 trillion KRW, or $13.76 billion. Operating profit rose by 45 percent year-on-year to reach 748.8 billion KRW, that’s $667.7 million.
The company’s home entertainment business is the standout performer generating total sales of 3.71 trillion RKW ($3.31 billion) and a 325.1 billion KRW ($289.9 million) profit, with LG Mobile second in terms of revenue. But, the mobile division continues to bleed cash. This time around in Q3, its losses were 146.3 billion RKW, that’s $130.5 million.
That betters large losses for Q3 2016 and 2017 — 436.4 billion KRW and 436.4 billion KRW, respectively — but it means that LG’s mobile division has lost the company $410 million in 2018 so far. But, as the chart below shows, LG has a long way to go before its mobile business stops hurting the group’s overall bottom line and restricting its otherwise impressive growth as a company.
The company played up its performance with a claim that it had weathered challenging global markets — where Chinese brands are competing hard and mobile saturation is weakening consumer demand — by “significantly reduced its operating deficit as a direct result of its business plan and its stronger focus on mid-range products.”
LG recently outed its new V40 ThinQ, a flagship smartphone that packs no fewer than five cameras, and it is optimistic that its launch will boost sales in the final quarter of the year. More widely, it said that the cost-cutting strategy implemented with the appointment of new LG Mobile CEO Hwang Jeong-hwan last November will see it continue to “consolidate and implement a more profitable foundation.”
That strategy has focused around mid-range devices and emerging markets, where LG believes it can offer strong value for money that’ll appeal to consumers in the market for a deal. That explains why mobile division sales are down this year but, crucially, the division is bleeding less capital. Whilst that strategy has helped stem losses, it remains to be seen whether it is the right one to turn the unit profitable.
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LG Mobile’s losses continue but now sales are falling too
Korean electronics giant LG is soaring to new heights, but its mobile division continues to lag well behind the rest of the company and the signs aren’t promising.
LG’s latest financials released today recorded another quarter of success with operating profit jumping 16 percent year-on-year to hit KRW 771 billion ($715.1 million) as overall sales rose 3.2 percent across the group. LG said its sales and profit for the first half of 2018 are at all-time highs but — and you knew a but was coming… — its smartphone division remains a significant loss-maker.
The company’s mobile and communications division — which houses LG Mobile — posted yet another quarter in the red. Sales of KRW 2.07 trillion ($1.92 billion) represented an annual drop of 23 percent, while the division carded an operating loss of KRW 185.4 billion, or $171.95 million.
That’s compared to a quarterly profit of KRW 407 billion ($377.48 million) for LG’s home entertainment business and a KRW 457.2 billion ($424.04 million) profit for its home appliance unit, which are LG’s two stand-out business units.
There’s nothing new here, losses are commonplace for LG Mobile.
It hasn’t been break-even or profitable since 2014. Those losses have been cut by some degree since the company shook up the division with new leadership in November 2017, but there’s plenty to worry about with sales dipping noticeably over the past two quarters of business.
This time around in Q2, LG put its mobile losses down to “the slowing growth of the global smartphone market and a decline in mid- to low-end smartphone sales in Latin America.” While it claimed that the size of the operating loss was down to investments in sales and marketing ahead of the release of its next flagship devices.
There’s a hint a reorganization — perhaps even layoffs — as the company added that it would “seek to further improve its business structure” as it aims prepares to push its LG G7 ThinQ and LG V35 ThinQ devices worldwide and get ready for those new launches.
More changes are on their way, you’d imagine, as LG is surely looking for a way to stem the bleeding but also retain a mobile business has certainly been iconic despite its struggles in recent times. Perhaps the answer is a downsizing in a similar style to Sony in 2016. Back then, the Japanese firm was losing even more than LG is per quarter but it began to be more strategic with its new device launches and target sales markets. The end result of that strategy was an end to the big losses and a more sustainable mobile business.
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LG promises to speed up bringing Android updates to its smartphones
LG is making efforts to improve the user experience on its devices after it opened a “Software Upgrade Center” in its native Korea.
The new lab will be focused on “providing customers worldwide with faster, timelier, smartphone operating system and software updates,” the company explained in a brief statement.
The idea is to help get the latest versions of Android out to more users at a faster pace than it does right now.
That’s a genuine problem for Android OEM who are tasked with bringing the latest flavor of Android to devices that already in the market. Issues they have to deal with include different chipsets, Android customization and carriers.
The issue has been pretty problematic for LG. Android Oreo, for example, announced by Google last September only began rolling out to the first handful of LG devices last month.
The Korean firm said that one of the first priorities for this new center is to get Oreo out to Korea-based owners of the LG G6 — last year’s flagship phone — before the end of this month. After that, it will look to expand the rollout to G6 owners in other parts of the world.
Beyond Android updates, the center will also focus on stability update to make sure that the newest features work on devices without compromising performance.
This move is one of the first major strategies from new LG Mobile CEO Hwang Jeong-hwan, who took the top job last year. He came directly from the company’s R&D division, which suggests that he identified the update issue as a fairly urgent one to address.
His bigger challenge is to stop LG’s mobile division bleeding capital. LG Electronics itself is forecasting record Q1 financial results later this month, but its smartphone unit is likely to post yet another loss that drags the parent down.
We’ll find out more when LG’s next flagship is unveiled next month.
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LG says its flagship G6 smartphone isn’t selling as well as expected
LG’s mobile business is in a sticky patch after the company admitted its flagship LG G6 smartphone hasn’t sold as well as expected. LG Electronics itself posted a business-wide operating income of KRW 664.1 billion (USD 588.2 million) on overall revenue KRW 14.55 trillion (USD 12.89 billion). While LG’s operating income rose by 14 percent year-on-year to outpace a four… Read More
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LG reports ~10% sales bump in Q1, mobile revenues up 4% QoQ, 2% YoY
LG Electronics has posted its Q1 2017 results, which show a nearly 10 per cent year-over-year jump in revenue. The electronics maker is reporting KRW 14.66 trillion ($12.70BN) in revenue, an increase of 9.7 per cent from the same period last year. LG Outs Its Next Phablet, The Slender LG Stylus 2
There’s less than a week to go until LG’s pre-MWC press conference, where the company is expected to lift the veil on a new flagship smartphone, the LG G5. But the South Korean mobile maker has another handset to show off in Barcelona — which it’s just announced today. Read More
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