LG Electronics Inc. closes its loss-making mobile communications unit in a step to streamline operations and focus on future projects such as electric vehicle components.
On July 31, the company will complete production and sales of mobile phone products to focus resources on growth areas, including electric vehicles, smart homes, robotics and artificial intelligence, according to a statement.
Phones accounted for 8.2% of LG sales last year and there will be short-term revenue losses, but the company expects closing be financially favorable in the long run.
It will strengthen its auto parts business and continue to develop mobile technologies such as sixth-generation networks and cameras, he said.
Shares rose to 4.1% after the announcement. The LG Display Co. affiliate. it also rose to 6.3%.
LG was one of the pioneers of the Android operating system, collaborating with Google on Alphabet Inc. in the Nexus line of smartphones and producing some of the best camera and screen technologies of the early days in the category.
In the United States, the company came in third behind Apple Inc.’s iPhone. and its South Korean giant Samsung Electronics Co., but has not been competitive for years and OnePlus, the first Chinese, has replaced it amid a global loss of market share to overseas rivals.
The company said in January that it would review the direction of its smartphone business, as earlier this month it promised to sell a roll-up phone this year.
The firm held talks on a possible sale, but negotiations failed due to large differences in the valuation of technology patents, according to local media reports.
LG has been expanding its vehicle components business and partnered with Magna International Inc. to create a joint venture to manufacture key parts for electric vehicles.
Shares of the Seoul-based electronics maker rose more than 30 percent since the announcement, fueled by hopes that the collaboration could contribute to Apple’s EV project. LG’s expertise in mobile technology development can help its offerings in the automated space, such as detecting user intent, drowsiness, or gestural interactions.
What Bloomberg Intelligence says
LG Electronics can position itself as a provider of component solutions for electric vehicles, increasing its appeal to technology giants like Apple and also to traditional carmakers aspiring to make “smart” electric vehicles.
Reducing the losses of its vehicle component unit, to 2 billion won in the last quarter, is a sign that it is on track to achieve a turnaround.
– Kevin Kim and Catherine Lim, BI analysts
Although Apple has not confirmed that it is working on a vehicle project, Magna CEO Swamy Kotagiri said publicly that his company was ready to build an Apple car at a recent industry forum, according to a report by Pulse News.