South Korea- based LG Electronics is shutting down its smartphone business and is reportedly turning its focus towards the growing electronic vehicle supply chain. By the end of July, LG will exit the phone business and shift its focus towards EV Business.
In July itself, LG will spin off its EV drive system segment. Canada’s Magna International, which is one of the leading auto parts suppliers in the world, will be buying a 49% stake in that unit to create a new joint venture.
The joint venture will be called LG Magna e-Powertrain and will be headquartered in Incheon. The company is also preparing to establish bases in Michigan and Nanjing aiming to secure customers in the two major markets for EVs.
Canadian-based Magna’s customers include major automakers such as GM, BMW and Ford Motor. Through this partnership, LG intends to have a greater potential to supply global automotive leaders.
LG had reported an operating profit in 2015 last, since then they have been enduring losses. Last year, they generated 41% of revenue through appliances and 24% through TV sales. Vehicle components brought in 5.8 trillion won($5.1 billion), amounting to 11% of revenue.
Magna likely weighed in on other factors as well before choosing LG as its partner. LG has the technological strength in core EV components, especially motor and batteries.
LG can also draw on the strength of other members of the LG group, which includes LG Chem- the world’s second biggest producer of EV batteries, LG’s Display and their LG Innotek that manufacture panels and supply onboard cameras for autos.
The company launched an internal team for automotive components in 2013 in anticipation of the growth of electric vehicles. In 2018, LG turned Austrian headlight supplier ZKW into a subsidiary. LG has taken a three-pronged approach for its automotive business, consisting of headlights, drive components and infotainment. This also includes car navigations and audio.
LG predicts the vehicle components divison to turn a profit for the first time in over 6 years in 2021. It aims to expand sales at an annual pace of 15%. This would turn vehicle components into one of LG’s largest segments, with more than 10 trillion won in annual sales in 2024.