LG Electronics' smartphone business suffered a loss in the 17th quarter. After the production base was transferred to Vietnam to reduce costs, Hana Financial Investment pointed out that LG Electronics has succeeded in improving cost efficiency, and the revenue of the mobile phone sector is expected to improve in the third quarter.
According to the Korean financial media "Asian Economy" report, Hana Financial Investment predicted on the 24th that LG Electronics' revenue in the third quarter was 1.5 trillion 9 billion won, with a profit of 649.4 billion won. Compared with the previous estimates, the revenue and profit are increased by 1% and 10% respectively. Hana Financial Investment said that the deficit status of the MC Business Division (including the LG mobile phone business) was better than originally estimated, so the estimated value was adjusted.
Jin Luhao, a researcher at Hana Financial Investment, explained that since LG Electronics spent more marketing expenses and relocation costs in the second quarter, these investments will begin to bear fruit.
In the second quarter, LG Electronics transferred the Pyeongtaek Plant in Gyeonggi-do, South Korea to Haiphong City, Vietnam. Due to the rapid rise of Chinese companies and the downturn in the global smartphone market, the MC business unit in charge of the mobile phone business began to lose money in the second quarter of 2015, and LG Electronics had to cut costs.
LG Electronics related people said at the time that Chinese smartphone companies have begun to eat into the flagship market, and it has become more important to reduce production costs. This is also the main reason for LG Electronics to adjust its production base.
Due to the low labor costs in Vietnam, companies can effectively reduce costs. According to data released by the Vietnam Wages Commission, the minimum monthly wage in 2019 was 4.18 million rupiah (about 206,000 won). Not only that, the Vietnamese government has also given many preferential treatments to attract investment from various countries.
LG Electronics not only produces mobile phones in Haiphong, but also has factories such as TVs and home appliances. It is widely believed that LG's production base will exert a huge multiplier effect. At present, the LG mobile phone relocation work has come to an end, and the Haiphong factory will produce the new 5G dual-screen mobile phone V50SThinQ.