LG Electronics reported to shut down its TV Business; Could sell the TV Business to China’s Hisense
LG Electronics’ TV Business seems to be in a tough spot, as a Korean publication has reported that the company has discussed business restructuring plans, including the sale of the TV Business within its Media & Entertainment division, with executives from China’s Hisense.
Shut down of LG Electronics TV Business?
Reportedly, LG Electronics visited Beijing, China, recently and met with senior officials from Hisense to coordinate plans for business restructuring, including the possibility of selling its TV business unit.
According to industry analysts, the structural weakening competitiveness of the TV Business, resulting from chronic deteriorating profitability and intensifying global competition, is the reason behind the possible shutdown.
It is revealed that LG Electronics’ global TV shipment has been fluctuating in the low to mid- 10% range over the past few years, whereas TCL and Hisense recorded 14% and 12.5%, respectively, last year. After being in the industry for nearly 60 years, the company is reportedly considering this decision amidst facing aggressive pricing competition from Chinese brands like TCL, Hisense and Xiaomi that are rapidly taking over the global market.
It is pointed out that the TV Business is shifting into a structure where the investment burden outweighs its contribution to LG Electronics’ overall cash generation, due to the accumulation of fixed costs such as OLED panel investment, production line maintenance, and global logistics.
Last year, LG Electronics also embarked on cost-cutting measures to improve the profitability of its TV Business. As per an industry insider, “From LG Electronics’ perspective, as price competition with Chinese companies intensifies, there must have been growing deliberation to streamline the business portfolio and reorganise around high-value businesses such as platforms and automotive electronics, rather than continuing to carry a low-profit structure.”
Currently, LG Electronics’ TV Business is part of the MS Business Division. If the sale actually proceeds, a preliminary process will likely be required to spin off the TV Business unit into a separate entity.
If the sale of the TV business unit materializes amidst these structural changes, it is being discussed that LG Electronics could accelerate its transition from a hardware manufacturing-centric business structure to a platform company centered on webOS.
In response to this news, LG Electronics have stated, “It is difficult to establish the claim that discussions regarding the sale of the business unit proceeded without any official announcement or review at the company level.”
