LG likely to sell off its smartphone plants to Vietnam’s Vingroup

The beleaguered LG Electronics is likely to sell off its smartphone manufacturing plants in Vietnam, China, and Brazil to Vietnam’s Vingroup as part of a split sale of the LG’s mobile communications unit. Vingroup has presented the best offer among other potential buyers, it is said.

According to a report The Korea Times, "the Vietnamese government and Vingroup have been seeking to expand into high-tech industries and to boost local job creation. Also premium demand in the region including in Vietnam, Myanmar and Thailand is high.”

The report suggests that Vingroup will take over the manufacturing facilities, while LG will continue its R&D, but with a reduced staff that will be stationed at its Korean headquarters.

This development comes on the back of the South Korean company saying that it is considering exiting the smartphone business altogether.

LG Electronics CEO Kwon Bong-seok hinted that the group would pull out of mobile phone manufacturing saying the company was open to all options over whether to continue running its money-losing smartphone business or not.

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Vingroup and its background

Vingroup is a big conglomerate in Vietnam with a market capitalization of $16.5 billion as 2020. It has good presence in myriad sectors including hotels and tourism, real estate, distribution, construction, automobiles, and, of course, mobile phones.

Vingroup's entry into mobile phones business (Vinsmart) was as recent as 2018. It is producing smartphones under an original design manufacturing (ODM) contract with LG Electronics. It is currently the third largest smartphone producer in Vietnam after Samsung Electronics and Oppo.

LG Electronics has an advanced smartphone manufacturing plant in Vietnam, which the Vietnamese government and Vingroup aim to utilize to up its global smartphone competitiveness, while the Brazil and Chinese plants will be used to better enter regional markets.

What is likely to happen?

The indications are LG Electronics will likely be responsible for the design and R&D while Vingroup will assemble the products as an original equipment manufacturing (OEM) company.

Interestingly, reports had it that Facebook was interested in absorbing LG's mobile-related patents and other intellectual properties but not hardware technology.

LG’s smartphone division has seen a deficit for 23 consecutive quarters going all the way back to the second quarter of 2015. Late last year, its accumulated operating deficit reached five trillion won.

Meanwhile, Kwon Bong-seok has sent an e-mail to employees to reassure them about their job security, but a workforce restructuring appears inevitable.

Via: The Korea Times

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