LG Reorganizes Loss- Making Phone Buisness

On Monday LG Electronics said it had restructured its mobile phone division to increase outsourcing of its low to mid-end smartphones, which analysts said represented an effort to cut costs and compete with Chinese rivals.

A spokeswoman for the South Korean company said, LG’s mobile communications business, which has reported an operating loss for 22 consecutive quarters, has created a new management title for original design manufacture (ODM). This refers to the outsourcing of design and manufacture of smartphones, with LG putting its label on the product. The spokeswoman added that it has also eliminated some research and production positions and reshuffled others.

According to Strategy Analytics in 2013 it was ranked No. 3 in global smartphone market, but this year it is not even in the top 7 after losing ground to Chinese smartphone makers like Huawei, Xiaomi  Oppo and Vivo, research firm Counterpoint says.

Oppo and Vivo, research firm Counterpoint says, “It knows it is competing with Chinese competitors, not Apple or Samsung, and it is trying to add to its lower-end models’ value for the price, by using original design manufacturers that Chinese firms use.”

“But even if LG sources its products, without marketing ability, it cannot win against Chinese firms who are good at it,” Kang added.