LG gives shock treatment to handset business

By Kim Yoo-chul

New LG Electronics boss Koo Bon-joon is wielding the scalpel on the company’s struggling mobile-phone unit, announcing major restructuring Tuesday that was highlighted by the dissolving of the smartphone and feature-phone development units.

Despite its status as the world’s third-largest handset vendor behind Nokia and Samsung Electronics, LG Electronics has been alarmed by its miniscule status in the market for smartphones, which provide larger margins than conventional phones.

The company reported a quarterly operating loss for the first time in six years for the third-quarter, and much of the damage was caused by its faltering handset unit.

The smartphone and feature-phone design teams had been the key units of LG Electronics’ mobile communications division (MCD) and obvious targets of criticism for the company’s incompetence in delivering products that could hold the fort against the iPhone and BlackBerry.

It’s unclear at the moment how the canning of the two divisions, which are to be replaced by a unit for broader product development and another dedicated to research and development (R&D) activities, will give the company’s handset business a needed jolt.

The picture will become clearer in the following weeks when the company will reveal follow-up measures, LG Electronics officials said.

``The new product development unit will put us in a better position to achieve cohesion in our efforts to improve our products on both the hardware and software sides. The new R&D division will centralize the control of our research activities overseas, particularly from our R&D centers in the United States and China, and this will allow technologies to be employed faster in our products,’’ said an LG Electronics official.

Koo, who recently replaced the much-criticized former CEO Nam Yong, plans to give more autonomy to the newly-establish product development division with the priority being placed on improving the quality of the company’s smartphones.

It’s somewhat ironic that Koo believes the quality improvement in smartphones could only be achieved by the removing the smartphone division, but this does show that he is willing to reach further across the company’s resources to give its handsets the creative input that is desperately needed.

The company has picked vice presidents Oh Hyung-hoon and Choi Hang-hoon to lead the newly-established product development and R&D unit, respectively. Kim Joon-ho, formerly an executive of LG Display, LG Group’s liquid crystal display unit, was named as the new quality-control chief of LG Electronics MCD.

Koo is also initiating changes to the company’s marketing strategies, spitting its global product strategy division to three teams that are each dedicated to smartphones, feature phones and next-generation mobile devices.

``The moves were aimed at improving product development and allow for faster decision-making,’’ LG Electronics spokesman Oh Sea-chun said.

Koo, the younger brother of LG Group Chairman Koo Bon-moo and former CEO of LG Display, replaced Nam last month.

More changes in the pipeline

A massive reshuffle was predicted when LG Electronics recently posted an ugly third-quarter, with its net profit dropping by more than 99 percent from a year earlier.

The ailing handset business was the main culprit, but the increasing price competition in the flat-screen television market, where LG Electronics trails Samsung for the runner-up spot, doesn’t inspire much confidence either.

LG Electronics has yet to show the potential of producing smartphones that could challenge Apple and Samsung’s lead in consumer smartphones, while industry observers are also increasingly unimpressed by its television business, which seems to lag behind rivals like Samsung and Sony in technology.

``Koo obviously has further changes prepared. Software is important, but regaining LG Electronics’ reputation for smart and edgy hardware will be a more urgent matter,’’ said a senior LG Group official.

``LG Electronics’ home entertainment division, which handles the television business, may also see some changes soon. It’s apparent that the company can’t compete with its rivals under its current structure.’’

Sales from LG’s home entertainment division, which takes up almost 40 percent of the company’s total revenue, rose 9 percent to 5.359 trillion won from 4.923 trillion won in the third quarter.

But operating profit fell to 122.9 billion won during the latest quarter from 227 billion won a year earlier, rampaged by higher market competition and drastic price cuts in televisions to lower high inventory.

구본준 LG전자 부회장, 휴대폰 조직 대 수술

LG전자가 휴대전화사업 조직을 대대적으로 재편하기로 했다.

흩어져 있던 일부 기능을 통합하고 컨트롤타워를 신설해 시장 변화에 기민하게 대응하는 한편 신속하게 스마트폰, 일반휴대폰을 내놓을 수 있도록 실행력을 높여 휴대전화사업 부활을 시도하는 것이 주요 내용이다.

2일 LG전자는 구본준 신임 부회장이 지난 1일 휴대전화 사업을 담당하는 MC(모바일커뮤니케이션)사업본부에 대해 조직개편과 인사를 단행했다고 밝혔다.

이에 따라 휴대전화 전략상품을 효과적으로 기획하기 위해 프로젝트매니지먼트팀이 신설됐다. 스마트폰 사업부와 일반폰 사업부는 폐지됐다.

휴대전화 연구개발을 담당하는 MC연구소도 재편됐다. 또 생산부문에서는 품질경쟁력을 강화하는 개편이 이뤄졌다.

LG전자 관계자는 ``이 같은 조직 변화는 제품 개발에 속도를 붙이고 시장의 요구에 보다 빠르게 대응하겠다는 뜻’’이라고 말했다.

좀처럼 돌파구를 찾지 못하고 있는 LG전자의 휴대전화사업부가 조직개편으로 재기의 발판을 마련할 수 있을 지 주목된다.

휴대전화사업부 수술에 이어 TV사업을 담당하는 (HE)홈엔터테인먼트 사업부에 대한 개편 작업도 잇따를 것으로 보인다.