With sales struggling, LG starts layoffs in China

LG’s mobile arm may be slowly turning things around internationally, and getting even its main competitor’s appreciation in the process, but China is different. At least that’s what can be gathered from LG’s woes over there.

The Korean company has started laying off employees in 26 offices in China. This comes as LG’s market share in China is hovering around the 1% mark, while Samsung leads the smartphone space with about 17% market share. That’s a stark contrast, and it’s clear that LG hasn’t yet found the ‘key’ to unlock the potential of the Chinese market for its products.

The major culprits for LG’s lackluster sales in China? Local brands, such as Oppo, Lenovo, Coolpad, Huawei, ZTE, and the likes. It seems like they are always the ones to blame when a foreign mobile device maker isn’t doing well in the mainland. That’s because these companies provide the Chinese consumers with high-end devices for incredibly low prices. And they do more and more of that as time passes, so their market share is probably going to increase even more.

LG’s first round of layoffs has apparently focused on management and sales positions. After the layoffs, some offices will be left with more personnel, but others just with ‘single digit’ staff numbers.

LG’s only comment so far has been to say that it’s adjusting and optimizing its strategy, and focusing on localizing its global ‘star’ models, and this could have an impact on human resources. However, the company hasn’t so far confirmed or denied widespread reports that appeared in the Chinese media about the layoffs.

According to “an industry source”, some LG partner stores have stopped selling LG devices over time, focusing instead on domestic brands such as Oppo. Those stores that do still have LG products on the shelves are basically just waiting to get rid of them as fast as possible, not placing any new orders, and discounting the old models in hopes of faster sales.

An analyst said that compared to Samsung, LG has less and worse relationships with the Chinese carriers. At the same time, the whole of the Chinese smartphone market is heading quickly in the direction of cheap but not underpowered devices, something LG hasn’t been able to match yet. Maybe it will in the future, as its mobile arm’s recovery can’t be complete (or sustained in the long run) with such a bad position in China. After all, that is the world’s biggest smartphone market, and opting out of it could prove fatal for any smaller player such as LG.

Via Yicai

Author: Vlad Bobleanta

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