Why did LG stop smartphone production in South Korea?

LG has announced that it’s halting operations at the LG plant in Pyeongtaek, South Korea which was responsible for the mass production of the LG V40 and LG G8. LG has confirmed that it is shifting its primary smartphone manufacturing operation to Haiphong, Vietnam which commenced operation in 2015.

LG hasn’t been that active in the smartphone department with launching only three smartphones globally in the last six months. After a tough couple of years, the South Korean company is shutting down its smartphone production unit in its home country.

The company has announced that it’s halting operations at the LG plant in Pyeongtaek, South Korea which was responsible for the mass production of the LG V40 and LG G8. LG has confirmed that it is shifting its primary smartphone manufacturing operation to Haiphong, Vietnam which commenced operation in 2015.

LG has revealed that its Haiphong initially was built with a $1.5 billion investment and is suited to “take on the task of producing high quality, competitive products for the global market”. But the move likely translates to LG’s recurring liabilities in the smartphone business after suffering from disappointing sales of its phones in the past year.

In 2018, LG could only amount to $7.08 billion in terms of yearly revenue, lagging behind major players like Samsung and Xiaomi by a huge margin. It also recorded $172 million looks in Q2 2018 after its smartphones from last year didn’t earn any rave reviews from tech publications around the world. The latest development points to the fact that LG now plans to save its production costs by reducing the places where its phones are manufactured.

The shutting down of the Korean plant means LG will have to start manufacturing its high-end smartphones like the LG G8 ThinQ and LG B50 ThinQ at its production bases in China, Vietnam, Brazil and India.

LG has issued an official statement on the development saying “Relocating our smartphone manufacturing operation from Pyeongtaek, South Korea to the newly expanded campus in Haiphong, Vietnam is all part of a larger strategy to improve our mobile business and to raise our competitive edge in an evolving industry”.

The statement further revealed “This relocation is part of broader capital investment to expand LG’s smartphone business as the Haiphong Campus, which commenced operation in 2015 with a USD 1.5 billion investment, is ideally suited to take on the task of producing high quality, competitive products for the global market. LG will benefit from the expansion of efficiencies and synergies as Haiphong was designed with the capability to manufacture a wide variety of products, from washing machines and TVs to auto infotainment systems and smartphones. The majority of the Pyeongtaek workforce will be relocated to Changwon, South Korea to support LG’s fast-growing home appliance business”.