Report: LG reorganizing smartphone business by outsourcing production of budget handsets

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LG reorganizing smartphone business by outsourcing production of budget handsets.
Image: YouTube | LG

LG Electronics is reportedly reorganizing its smartphone business. The South Korean conglomerate intends to outsource the development and production of its mid and low-end handsets to original design manufacturers (ODMs).

Market insiders believe the corporation’s operational pivot might help it expand its share of the global mobile device market.

How LG is Changing its Smartphone Business

According to Yahoo! Financial, LG confirmed it created a new executive position to oversee its ODM-related operations.

The company is also making staff changes within its internal smartphone research and development group. The firm is in the process of eliminating some positions while reassigning other staffers previously tasked with developing budget projects to work on its high-end handset projects.

Once the dust settles, the electronics maker will introduce the public to mobile devices made by ODMs but featuring its branding.

Counterpoint, an industry research company, believes LG is reorganizing its smartphone business in reaction to prevailing market trends. The conglomerate has lost ground in the budget handset market to competitors that outsource their device manufacturing. By employing the same strategy, the company hopes to win back old customers by launching more affordable products.

However, Counterpoint argues LG needs to put some marketing muscle behind its forthcoming offerings for them to succeed.

Fall From Grace and a Possible Revival

A decade ago, LG stood as one of the world’s largest smartphone makers. In the early 2010s, the company’s products ranked only below Samsung and Apple’s offerings in end-market demand. Its sleek designs and remarkably vibrant displays made its mobiles stand out in a highly competitive and crowded marketplace.

Unfortunately, LG lost its standing within the sector as time has passed.

In the premium arena, it failed to match innovations like Apple’s performance breakthroughs and Samsung’s advances in panel technology. Like other corporate champions of its era (HTC and Motorola), it continually introduced new products that lacked the appeal of its older lineup.

The conglomerate’s mobile phone division went from being one of its most successful segments to a drag on its overall profitability. The unit has posted operating losses for the past 22 quarters. But its organization may reverse its declining fortunes with its new ODM-centric direction.

For one thing, Huawei, a titan in the global smartphone industry, recently lost the ability to many mission-critical handset parts. The telecom reportedly negotiated the sale of its budget device subsidiary, Honor, because of its procurement challenges. The firm’s declining presence in the marketplace presents LG with an opportunity to revive its phone business.

In addition, the South Korean conglomerate is showing signs it wants to bring its position as a player in the premium smartphone arena. In October, the company introduced the Wing dual-screen device, which received praise for its unconventional design and superb performance.

Provided LG manages to release a novel handset that connects with consumers, it could be nipping at Apple and Samsung’s heels once again.

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