LG outsources loss-making cell phone sector to concentrate on high-end products

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LG aims to turn its cell phone business around

LG Electronics tackled the loss-making division of cell phones on Monday with a major restructuring that has had an effect on nearly every area of the company. Some may say that it’s a case of too little too late, or that it’s a last-ditch effort (none of which may be wrong but at least they’re taking steps to deal with the matter.

The company has reported to Reuters that it will outsource low and mid-range handsets to the original design manufacturer (ODM). This basically means that a third-party company will design and produce devices, and LG will clap their logo on the resulting products.

A spokesperson also told Reuters that some research and development roles had also been removed, while others had been reshaped. The moves should help the company better concentrate its attention on building premium smartphones, such as the recently launched LG Wing.

The South Korean electronics producer was one of the top three smartphone manufacturers in the world, but that was a lot of moons ago. The business isn’t even in the top seven today. According to the journal, LG’s mobile company posted an operating loss of 22 consecutive quarters.

Tom Kang, an analyst at Counterpoint, said that LG is seeking to add price value to its lower-end models by using ODMs. “But even if LG supplies its products without a marketing capability, it cannot win against Chinese firms that are good at it,” Kang added.

Masthead credit: Grzegorz Czapski

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