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LG’s Mobile Business Continues to Suffer; Company Blames ‘Aggressive Pricing by Chinese Brands’ as One Reason

Jul 30, 2019
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While most smartphone vendors have seen their sales slowdown in recent years because of an industry-wide slump, some, like LG, surely have it worse than others. The company has posted its financial results for the second quarter of the year, and its smartphone wing shows no sign of improvement. The South Korean giant managed to rake in revenue of $1.38 billion for the April-June quarter, but that translates into a 21.3 percent year-over-year decrease.

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The only possible silver lining is that compared to the first quarter of the year, the company’s sales grew 6.8 percent. Nevertheless, the smartphone division registered an operating loss of $268.4 million this quarter. The company attributes the low sales to the declining smartphone market and aggressive pricing strategy employed by Chinese competitors. Additionally, the vendor also saw its costs go up because of marketing campaigns of new models and relocation of manufacturing activities to Vietnam.

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However, the company is still positive that things will turn around in the third quarter, as it plans to release mass-tier handsets. Apparently, these smartphones will cater to more budget-conscious segments. For instance, the W-series of smartphones has especially been created for the Indian market. From Google to Samsung, a lot of manufacturers are trying to broaden their portfolio to capture a wider target audience and LG wants to follow the same approach now.

Other than that, the company also believes that increasing demand for 5G products will also help it come out of this lull. It is already selling the V50 ThinQ 5G in select markets, and its early sales actually looked promising. The phone is relatively more affordable when compared to other 5G offerings in the market.

As a whole, LG saw its sales go up by 4.1 percent to $13.4 billion, although operating income went down 15.4 percent year-over-year. However, the mobile unit can rely on the revenue generated by other divisions for only so long, and unless it steps up its hardware, software, and even branding game, it might sink into oblivion.

Do you think it’s high time that LG quits the smartphone business or should the company stay and come up with an effective strategy? Share your thoughts with us by commenting below.

Source: LG Newsroom

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