LG Retreats From Chinese Smartphone Market After Heavy Losses
LG is coming off its biggest year ever, in terms of overall revenue—it generated 64.1 trillion South Korean Won (around $55.4 billion U.S. currency) during all of 2017 and across all of its divisions, a 10.9 percent jump from the previous year. It also generated its highest profit since 2009, coming out ahead 2.47 trillion KRW (~$2.23 billion), so there is plenty to celebrate. However, its mobile division has been struggling, especially in China where LG has reportedly decided to stop selling smartphones.
A Chinese-language news report quotes a representative at LG's Beijing office as saying that LG is pulling its "mobile phone business out of China." While this has not been confirmed by LG in any official statement (not yet, anyway), the company did acknowledge near the end of January that its mobile division faced a "challenging marketplace and strong competition from Chinese brands" in 2017.
LG did see a bump in revenue from its mobile division during the fourth quarter of 2017, in which it brought in 3.07 trillion KRW (~$2.77 billion). However, LG's also been reporting operating losses from mobile, including a loss of 213.2 billion KRW (~$192.33 million) in the fourth quarter. LG put a positive spin on this, saying it was able to narrow its losses in its most recent quarter due to strong sales of its flagship V30 smartphone and other premium handsets. LG also gave credit to an "improved business structure."
So why pull out of China if LG has been able to reduce its overall losses in the mobile market? The reason likely has to do with LG's performance in that particularly territory. It's not clear how much mobile revenue LG is collecting from China, however the last mobile phone LG added to its website in China is the G5 SE, essentially a downgraded version of the G5. That is a dated handset that debuted nearly two years ago, back in May 2016.
According to Kantar World Panel, the top five smartphone brands in China include Huawei, Xiaomi, Apple, Vivo, and Oppo. Between the five, they make up 91 percent of smartphone sales, up from 79 percent a year earlier. With that being the case, LG is not likely seeing a lot of sales in China, hence why it's feasible the company would pull out and focus its mobile efforts elsewhere.