By Kim Yoo-chul
Staff Reporter

LG Electronics has stopped the direct production of personal computers in China to save costs and boost design-related capability.

"We halted production of personal computers in our China plant in Kunshan, Jiangsu Province, from September this year owing to falling profit," a company spokesman said.

"The line has been switched to manufacture vehicle navigation systems to meet rising demand," the spokesman added.

Since late 2003, LG Electronics had produced some of its laptop models at the plant, while most of its desktop PCs and mini notebooks were foundry or contract-based manufactured, according to the company.

Foundry is a contract manufacturing process, which has widely been adopted by big companies such as Apple of the United States in a bid to increase productivity with cost cuts.

Under the strategy change, some of the leading Taiwanese laptop makers such as MSI will manufacture the goods for LG with technology and design provided by the South Korean company, while desktop PCs will be produced by LG domestically.

LG representatives say the company will put more focus on strengthening design and research and development capabilities for most of its key consumer products ― a similar strategy taken by Apple.

Most of Apple's iconic iPhones have currently been produced outside the United States on a contract basis in labor-intensive foreign countries.

LG's PC unit posted 50 billion won in operating losses last year mainly due to its weaker brand image.

Thanks to growing demand for budget PCs or net-books amid the economic uncertainty, the company is forecast to post profit this year on an annual basis, industry sources said.

yckim@koreatimes.co.kr