LG’s mobile division reports big losses in fourth quarter

Korean electronics giant LG released its 2017 financial results. Boasting big gains in its consumer appliance and home electronics division, the company experienced its highest annual sales in history. While overall numbers were good, the company’s mobile division continues to hemorrhage money.

LG  Mobile Communications Company posted $10.52 billion in sales in 2017. With the exception of Q1, the company experienced losses every quarter, nearing $641 million for the year.

As for overall sales, LG sold 13.9 million units in 2017. That’s about a 1 percent drop in overall sales from 2016. In its presentation to investors, LG attributes the slight drop in sales to fierce competition from Chinese manufacturers in emerging markets. While the company does not directly, sales for Chinese manufacturers Huawei, Oppo, and Vivo eclipse that of LG by a significant margin.

As for the fourth quarter,  LG’s mobile division posted $2.77 billion in in sales. Losses for the quarter came in at $192 million. The division saw a 9 percent bump in sales for the quarter that can be attributed to release of the LG V30 and Pixel 2XL.

While the quarterly earnings sound bleak, it’s a significant improvement over the previous quarter where the mobile division lost over $331 million. Year-over-year, losses were reduced by more than 40 percent for the division.

LG has several explanations for its losses in 2017. Rival manufacturers from emerging markets such as China are putting up stiff competition for LG. The price of goods and components also cut into the company’s bottom line.

In addition to competition and volatile prices for components, there’s another interesting factor that contributed to overall losses. LG appears to lose money marketing its flagship devices. In its quarterly earnings presentation, LG identified marketing costs for the V30 as adversely affecting overall profitability.

LG intends to reduce its losses in 2018 by limiting the number of new devices it releases in 2018. LG Electronics vice chairman Cho Sung-jin recently stated the company planned to “retain existing models longer by unveiling more variant models of the G series or V series.”

The strategy may be bad news for customers waiting for the LG G7. While many people expect the phone to be announced in February at Mobile World Congress, it looks like it may be on hold for now. During a press conference at CES, Cho told the audience “We will unveil new smartphones when it is needed. But we will not launch it just because other rivals do.”