Shifting Production Base to Vietnam
LG Electronics will stop domestic production of smartphones and move production bases to Vietnam. The company has finally opted for overseas production of smartphones in order to secure competitiveness of its Mobile Communication Business Division, which has been suffering from a chronic deficit.
LG Electronics has decided to discontinue smartphone production at its Pyeongtaek plant in Gyeonggi Province, Korea within this year. It will prune smartphone shipments from the plant gradually starting this June. Its smartphones will be produced at its factory in Hai Phong in northern Vietnam.
"The cumulative deficit of LG Electronics in the smartphone sector amounts to 3 trillion won, so the company has decided to move its production base from Pyeongtaek to Vietnam in order to improve its profitability. In Vietnam, it will be able to benefit from support and tax benefit from the Vietnamese government," an industry observer said.
LG Electronics is producing smartphones at four locations –- Pyongtaek in Korea, Vietnam, Brazil and China. The Pyeongtaek plant mainly produces premium phones. It has accounted for about 10 percent to 20 percent of all LG smartphone production.
The proportion of smartphones produced in Korea in the global smartphone market plummeted from 11.4 percent in 2008 to 1.3 percent in 2018, said market researcher Strategy Analytics (SA).
While handset production in Korea plunged, handset production ballooned in emerging countries such as China, India and Vietnam. As of last year, China accounted for 70 percent of the world’s smartphone production, India 13 percent, and Vietnam 10 percent.
The LG Electronics’s smartphone business recorded a deficit for the 15th consecutive quarter until the fourth quarter of 2018.