South Korean tech giant LG hasn’t been known for its smartphones, unfortunately. Even though it has had some innovative designs and some really great devices under its belt, the sales numbers have remained largely unimpressive.
Now, it appears that the company could be changing track. Reports suggest that LG has now decided to train its guns towards making flagships like LG Velvet, LG Wing and other upcoming devices like the rollable phone.
However, in order to make up for the numbers lost and compete with the Chinese brands, LG will outsource designing and manufacturing of low to mid-range devices of budget smartphones to ODMs (Original Design Manufacturers) and sell them under its own branding.
Under this agreement, LG will make use of Chinese ODMs, an approach that is similar to what Samsung has done in the past. This Korean giant has already outsourced some production to Chinese companies to compete with larger Chinese makers.
How will outsourcing help LG?
The decision to offload manufacturing of mass devices to ODMs will help LG to cut costs and restructure the team in order to focus and improve inhouse R&D of premium devices.
This decision is inspired by the fact that while the devices at the lower end of the price gamut may sell in numbers, they do not offer returns in similar proportion. Hence, doing away with the additional costs around the entire lifecycle of budget and low-end phones makes little or no sense for the company.
LG, which was once among the top three smartphone makers back in 2013, lost to Chinese makers like Xiaomi, Oppo, Vivo, Huawei and Xiaomi etc. and doesn’t even feature in top 7 in 2020. As a result, LG has registered an operating loss for 22 consecutive quarters.
With the restructured workforce and realigned focus, the company expects to compete with the industry-leading brands with its innovative phones and at the same time take on the Chinese smartphone makers with the help of Chinese manufacturers.