LG hands TV boss keys to the mobile business

LG has announced the President of its profitable Home Entertainment business will also be taking the struggling Mobile Communications unit under his wing.

Brian Kwon, currently president of LG’s Home Entertainment Company, will assume control of the Mobile Communications business, tasked with turning the profit-allergic unit into a world beater. While it might seem like somewhat of a daunting task, the LG management team has pointed towards his success in turning the TV, audio and PC business into category leaders.

Looking at the challenge which Kwon faces, it is certainly a steep one. Having had a respectable mobile business in years gone, LG has been slipping down the rankings over the last few years. According to data from Counterpoint Research, LG’s share of the global smartphone market has declined to roughly 3%, with shipments down to an estimated 9.8 million units over the second quarter of 2018. During the same quarter of 2017, LG shipped 13.3 million units, while it was 13.9 million in 2016. The global smartphone market is certainly sluggish, though LG seem to be feeling the impact more than others.

Financially there isn’t much to shout about either. During the last earnings call, the Mobile Communications business unit reported a loss of KRW146 billion, an operating income of -7.2%. This is an improvement on the previous quarter, where the operating income was as low as -8.9%, though it is still miles behind the Home Entertainment business. Here, profits stood at KRW325 billion, with an operating margin of 8.8%.

There certainly is a lot of work for Kwon to do, though the 5G bonanza might offer an opportunity to recapture lost fortunes.

“LG has struggled in an Everest like uphill climb to be successful on its mobile initiatives which have run into a number of company specific and secular challenges over the past few years,” said Daniel Ives, MD of Equity Research at Wedbush Securities. “We believe this management change is a step in the right direction as the company enters a pivotal window to be successful on its next generation 5G mobile endeavours between now and 2020, herein lies the opportunity for LG on the horizon and they need to capitalize.”

Announced back in August, LG is working in partnership with Sprint to bring a 5G-compatiable phone to the market during the first half of 2019. Although details are very thin on the ground at the moment, this device might well be one of the first, if not the first, 5G-compatible smartphones available to US customers. Right now it looks like it is in a race with Motorola to claim the ‘first’ title, the smartphone leaders don’t look interested in the first adopters, though whether this device will be any good remains to be seen. First devices are rarely the best in the long-run, but it does offer an advantage.

For the flailing Mobile Communications business, this is a massive opportunity. LG has been gathering some steam in the US, partly thanks to the woes of the Chinese brands and perhaps cash-conscious consumers being turned off by prices, and launching a 5G-compatible smartphone next year offers Kwon a platform to build on. LG stakeholders will be hoping he can work the same wonders here as he has for Home Entertainment.