LG Electronics' losses in the smartphone business are increasing as its highly expected smartphone, G7 ThinkQ, is showing poor sales.
LG Electronics announced on July 26 that sales in the second quarter reached 15.194 trillion won, with operating profit topping 770 billion won. Although sales and operating profit hit a record high in the first half of the year, with sales exceeding 30 trillion won for the first time, the MC business division, which operates the smartphone business, suffered a large loss.
The MC division posted sales of 2.723 trillion won and operating loss of 185.4 billion won in the second quarter. Deficit has increased compared to the previous quarter (136.1 billion won) or the second quarter last year (132.4 billion won). This is a bigger figure than the stock market’s estimate of 140 billion won.
The MC division recorded an operating loss of 132.4 billion won in the second quarter last year, 375.3 billion won in the third quarter, and 213.2 billion won in the fourth quarter. In the first quarter this year, the figure fell to 130 billion won, spawning expectations for earnings improvement. But the second quarter performance dashed the expectations
As a result, the MC division has recorded a loss for the 13th consecutive quarters from the second quarter of 2015 to the second quarter of 2018.
The increase in the deficit is attributable to the fact that LG Electronics' newly launched strategic smartphone G7 ThinQ did not meet sales expectations, but its marketing costs increased sharply.
LG Electronics said, "Sales declined compared to the same period of last year due to the slowdown in global smartphone market growth and the decline in sales of low-priced smartphones in Latin America. Operating loss continued with lower sales and higher marketing costs.”
The problem is that the situation is unlikely to improve in the third quarter. LG Electronics said, "The smartphone market is expected to have intense competition in the premium market due to stagnant growth and the introduction of competitive products." LG Electronics’ plans to launch V40 ThinQ in the second half, but competitors will also launch premium smartphones including Samsung Electronics' Galaxy Note 9 and Apple's new iPhone model, so the competition will continue to be fierce in the second half.