LG's smartphone business saw positive trends in Q2 despite pandemic2
LG cut its losses despite the global pandemic
The smartphone division at LG reported revenues of $1.07 billion (KRW 1.31 trillion) for the April-June quarter. Those numbers are down 18.63% versus the same quarter twelve months earlier, but that is actually not too bad considering the global pandemic.
The results also represent a significant rebound of 31% over the first quarter, in which LG Mobile Communications totaled $840 million (KRW 1 trillion). The company said this was down to fewer supply chain disruptions and the gradual reopening of Europe and the US following lockdowns.
Another positive trend noted by the South Korean company was profitability. The division experienced a loss of $169.10 million (KRW 206.5 billion) in the quarter.
Losses aren’t usually seen as a positive sign, but in LG’s case, the numbers were down dramatically from the $200 million (KRW 237.8 billion) and $260 million (KRW 313.0 billion) losses recorded in Q1 2020 and Q2 2019 respectively.
The company said it reduced marketing expenses and unnecessary resources in line with the decline in sales to cut losses. It improved the cost structure of new models too, a practice that should continue into future quarters.
A lot is riding on the LG Velvet 5G
Looking at the current quarter, LG Mobile Communications expects global smartphone demand to partially recover after what it described as a “low point” in the second quarter. Competition is likely to intensify too as rival manufacturers launch new models and expand their mid-range lineups.
Marketing expenses at LG will increase with the introduction of new models this quarter, but overall profitability should improve. That will be made possible by the launch of the LG Velvet internationally and new midrange devices.