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| LG Group headquarters in Yeouido Seoul / Courtesy of LG Electronics |
By Kim Hyun-bin
Vingroup is set to acquire all of LG Electronics smartphone manufacturing plants in Vietnam, China and Brazil as part of the Korean tech giant conducting a split sale of its mobile communications division due to mounting deficits in recent years, according to a source familiar with the matter, Thursday.
One of the biggest conglomerates in Vietnam, Vingroup is seeking to expand into the high-tech sector through its acquisition of LG's state-of-the-art production facilities.
"The Vietnamese government and Vingroup have been seeking to expand into high-tech industries and to boost local job creation. Also premium demand in the region including in Vietnam, Myanmar and Thailand is high," a senior industry official told The Korea Times. "They are only seeking to purchase the manufacturing facilities, while LG plans to continue it R&D but with a reduced staff that will be stationed here at its Korean headquarters. Vingroup has presented the best offer among other potential buyers."
On Wednesday, LG Electronics CEO Kwon Bong-seok hinted that the group would pull out of mobile phone manufacturing saying the company was open to all options over whether to continue running its money-losing smartphone business or not.
Facebook was one of the companies interested in absorbing LG's mobile-related patents and other intellectual properties not hardware technology.
LG Electronics currently operates an advanced smartphone manufacturing plant in Vietnam, which the Vietnamese government and Vingroup aim to utilize to up its global smartphone competitiveness while creating more local jobs, while the Brazil and Chinese plants will be used to better enter regional markets.
In 2019, LG integrated its Pyeongtaek production plant with the Haiphong Vietnam plant relocating its key smartphone manufacturing facilities there.
Vingroup launched its smartphone unit Vinsmart in 2018 and operates a manufacturing plant in the Haiphong Industrial Zone near the LG smartphone plant, which the Vietnamese conglomerate hopes to create synergy with.
LG Electronics had reportedly been reviewing the split sale of its mobile communications production plants, while holding on to its R&D sector, to better enhance business efficiency, for some time.
"We have all possibilities open and are reviewing all business options," an LG Electronics official told The Korea Times.
Once the two parties reach an agreement, LG Electronics will likely take a similar path as Apple, in which LG will be responsible for the design and R&D while Vingroup assembles the products as an original equipment manufacturing (OEM) company.
Reassuring employees LG Electronics CEO Kwon sent out an e-mail Wednesday acknowledging there would be large scale restructuring efforts. "No matter how the fate of the mobile communications division is decided, employees should not worry as job security will be maintained," he said. "We came to a point to where we have to objectively judge our mobile future competitiveness and decide accordingly."
The company had tried to revive the division by enhancing its product portfolio and relocating production facilities, but failed to reduce the technological gap with global powerhouses such as Samsung and Apple. LG has seen a deficit for 23 consecutive quarters in its smartphone unit starting from the second quarter of 2015 and the accumulated operating deficit hit five trillion won late last year.
