LG failed to realize ‘economies of a scale,’ unlike Apple and Samsung Electronics. Cutting fixed costs is a one-time measure. LG’s difficulty in the smartphone business is a structural problem that can’t be addressed without radical measures such as relocating all of its manufacturing lines to Vietnam and other cheap Asian countries.
Market insiders told the publication that the job cuts were to reduce fixed costs at a time when LG needs to increase profit. This comes after the company’s mobile division posted an operating loss for three quarters in a row.
“The smartphone marketplace is expected to be increasingly competitive in 2016 due to anticipated premium models from competitors and further price competition within the mass tier space” LG said.The smartphone marketplace is expected to be increasingly competitive in 2016 due to anticipated premium models from competitors and further price competition within the mass tier space,&rdquo.The company launched its modular flagship, the LG G5 a few months back and hoped that the phone would be able to improve profitability in the company’s mobile unit. The report notes that while it looked like it would meet expectations in the first few weeks of launch, the initial attention the device withered and shipments continued to drop.