Korean electronics vendor LG has set its sights on a cost reduction of KRW3tn (Eur1.6bn) in 2009, despite the fact that the handsets division is doing well.

During the fourth quarter LG’s Mobile Communication Company reported a 34.6 per cent jump in sales year on year to KRW4.49tn, with shipments of handsets up 8 per cent year on year to 25.7 million.

This put LG into third spot with 8.6 per cent market share behind Samsung and market leader Nokia.

But weaker performance in other parts of the business has prompted the company to establish a “Crisis War Room (CWR)” to implement an aggressive cost saving business plan. The company did not say where the cutbacks would be made, but said it would not reduce, and could even increase, its investment in R&D, marketing, branding and design.

Global mobile phone shipments during the fourth quarter of 2008 fell 10 per cent year over year, to reach 295 million units, marking the industry’s slowest growth rate since 2001.

According to the latest research from industry analyst Strategy Analytics, three of the big five mobile phone vendors recorded negative annual growth rates during the fourth quarter.