LG to outsource budget phone production and shift focus to flagships

In an attempt to bring its struggling smartphone business back on track, LG started 2020 with a new strategy. As detailed in LG’s 2019 financial report, this strategy aimed to shift focus from premium flagships, like the LG G-series, to “mass-premium and mass-tier 5G products,” like the LG Velvet. The report also revealed that the company planned on improving cost competitiveness by “proactively utilizing ODMs in mass-tier products.” But while LG has already realized the shift to mass-premium and mass-tier 5G devices this year, the company is yet to ramp up outsourcing of mass-tier products. However, that might change soon.

According to a recent report from Reuters, LG is now planning to increase outsourcing of its low to mid-range smartphones to cut costs and compete with Chinese rivals. To this end, LG has created a new management title for original design manufacturers (ODMs), who will be responsible for designing and manufacturing low to mid-range LG devices. The company has also removed some research and production positions and restructured others to focus its in-house R&D and production units on upcoming premium smartphones.

Speaking about LG’s latest announcement, Tom Kang from Counterpoint Research said, “It knows it is competing with Chinese competitors, not Apple or Samsung, and it is trying to add to its lower-end models’ value for the price, by using original design manufacturers that Chinese firms use. But even if LG sources its products, without marketing ability, it cannot win against Chinese firms who are good at it.”

It’s also worth noting that LG’s move to restructure its R&D and production units to focus on upcoming premium products falls in line with a recent report which suggests that the company will launch a true flagship and a rollable smartphone next year. The next flagship smartphone from the company, codenamed Rainbow, is expected to feature Qualcomm’s latest flagship Snapdragon 888 chip. The device is expected to hit the market in the first quarter of 2021. The rollable smartphone, codenamed Project B, will be the second device in the company’s Explorer Project, and it is expected to be unveiled in March next year.

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