South Korean manufacturer LG has just made the decision of stopping the production of television panels and smartphones on its home soil and will move capacity abroad to stem losses.
|The LG Display factory in Paju, South Korea will stop producing television and smartphone panels
LG Display CEO Jeong Ho-young announced at last month's CES electronics expo in Las Vegas that the company will end the domestic production of liquid crystal display panels for TVs by the end of the year, with the capacity to be shifted to its production base in Guangzhou, China, according to Nikkei Asian Review.
The manufacturer posted a net loss of roughly KRW2.87 trillion ($2.4 billion) last year – not the first time it slipped into the red in the past eight years, but a new record low. Chinese rivals ate into the company's profitability, with the final blow coming from the losses stemming from weak deliveries of OLED panels for Apple.
Besides, LG's smartphone arm once had the fourth-largest global market share but has now fallen to ninth place. The segment suffered a roughly KRW1 trillion ($836.24 million) in operating losses in 2019, marking its fifth consecutive year in the red.
LG Electronics, which oversees smartphones, decided last year to shut down its mobile phone factory in South Korea and move capacity to Vietnam. CEO Brian Kwon said the company's growth strategy will prioritise earnings.
The production line recently wrapped up its relocation to northern Vietnam, where workers' wages are less than what is collected in South Korea.
LG Electronics runs mobile phone factories in China, India, and Brazil as well. The goal is to turn a profit next year, said Kwon.
The once-proud LCD and smartphone businesses are struggling due to missteps in investments and in reading consumer demand. LG poured copious funds into making OLED panels but customers remained attached to LCD televisions.
Purchases of OLED televisions failed to rise as anticipated. Only 3.3 million OLEDs were delivered last year, or 1.1 per cent of the 287 million TVs delivered overall.
LG used to lead the way among smartphone manufacturers in balancing quality with affordability, but that distinction has been taken over by the likes of China's Oppo and Xiaomi. The sudden slowdown in smartphone purchases has resulted in a vicious cycle in which LG is unable to raise development expenses.
The sudden slowdown in smartphone purchases has resulted in a vicious cycle in which LG is unable to raise development expenses.