LG Mobile struggles to make a profit as smartphone sales fall 17% in Q4 2018
LG has reported a poor Q4 2018 after its mobile division has failed to post a profit over the last two years and smartphone sales continue to tumble.
The entire smartphone industry is seeing a slowdown in sales right now and LG is no exception. The company's mobile division is struggling to post a profit for over two years and the Q4 2018 financial report shows how poorly it performed last year.
LG Electronics has reported revenues of 15.77 trillion won (US$ 13.99 billion) for Q4 2018, which is down 7% compared to the same quarter last year. It posted profits of 75.7 billion won (US$ 67.1 million), down 79.3% YoY, while net profit was down 80.7 billion won from 182.8 billion won a year earlier. The decrease in profits is "primarily due to lower sales of mobile products", said LG.
What is even worrisome its mobile division's financial report. LG's mobile division (LG Mobile Communications Company), reported total revenues of $7.08 billion. While that sounds pretty good on its own, that still resulted in a total operating loss of $700.65 million for the year. Similarly, mobile sales decreased by 16% compared to Q3 2018 to $1.51 billion for Q4.
LG said that the loss in mobile sector widened as marketing expense increased in order to support the launch of new products during peak season and reduce channel inventories.
Despite the poor performance of mobile products, LG as a whole actually had a pretty great year. Overall, the company reported record revenues of $54.4 billion and a total yearly profit of $2.40 billion - an increase of 10% compared to 2017. According to LG, these numbers are a result of "record profitability from appliances and home entertainment products".
The company remains downbeat and says that the outlook is not great for 2019 as the "global economy continues to slow down". In 2019 it expects smartphone demand to continue to fall and price competition to intensify. It will focus on the operator-driven market such as North America and Korea to secure stable sales, and preoccupy 5G and new form factor device markets to capture additional sales opportunities.
LG's mobile division will push 5G products and smartphones featuring different form factors while focusing on key markets where the LG brand remains strong.
LG is also hopefull over its new products, which it has lined up for launch at MWC. It believes they will bring in enough sales so that the company can avoid new questions about the fate of its mobile business. Also, it will be interesting to see how LG Mobile tackles the emergence and growth of Xiaomi, Huawei, and Oppo throughout the next 12 months.