Korean company LG Electronics announced on Monday that it had done a reorganization of its mobile phone division to increase efficiency and sales by outsourcing its low to mid-end smartphones, in a direct move analysts to significantly cut costs and compete with its competitors.

The fortunes of the mobile communications subsidiary of the company have been on a downward spiral for over five years, with operating losses reported for 22 consecutive quarters, and this has led to a new management direction and the choice of Original Design Manufacturer (ODM), a spokeswoman for the company said (via).

LG had said last year that it will expand ODM to its mid-range smartphones from just low-end smartphones. The company will now outsource the design and manufacture of its smartphones, while still maintaining the LG brand name on the products.

LG has also jettisoned some of its research and production positions and realigned others to fit with its new business model, which may imply redundancy for a segment of the company’s staff. The move is part of plans to rely more on LG’s in-house research and development and production of high-end smartphones, with low and mid-end ones to be produced by ODM.

In 2013 LG was ranked No. 3 in the global smartphone market by Strategy Analytics, seven years later, the company is not even among the top seven OEMs, indicating massive regression in turnover and market share over this period, with Chinese brands like Huawei, Xiaomi, Oppo and Vivo, taking preeminent positions at the top, research firm Counterpoint stated.

Further illuminating the scenario, the research firm states that LG knows it is competing with Chinese competitors, not Apple or Samsung, and it is seeking to add to its lower-end models’ value by using Chinese original design manufacturers, according to Counterpoint analyst, Tom Kang.

Going further, Kang states that even if LG outsources the production of that segment of its products, without the requisite marketing ability, it is bound to come short against Chinese tech firms who have a better marketing strategy.

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South Korean giant LG, which announced the LG Velvet, and LG Wing this year, is looking to expand its ties with ODMs in 2021. Previously, some of the LG smartphones from 2018 to the current year(2020) were actually made by ODMs. And now, a report from Korea now says that the company will outsource more smartphones from ODMs next year, including the LG Velvet2(Tentative).

LG Velvet 2 outsourced from ODM

A report from TheElec says LG will seek ODMs to make more of its smartphones in 2021. In fact, the report explicitly mentions that by 2021, ODMs will account for 70% of LG’s Smartphone production. For the unware, ODM is an Original Design Manufacturer. Simply put, it is a company that designs and manufactures a product that is ultimately sold by the other(here LG). That said, the next iteration of Velvet, the Velvet 2(Tentative) will reportedly be made by ODMs.

Besides, LG’s current ODM partners are Wingtech, Huaqin, and Longcheer in China. Interestingly, the report also says LG began seeking ODMs in 2018. Back then, only 10% of LG devices were made by contract companies. However, the number increased to 30%, and 60% in 2019, and 2020 respectively. This suggests that LG’s earlier plan to expand its market may come true soon. Plus, the new report also falls in line with the earlier ODM strengthening strategy for launching products to mass markets.

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Other plans for 2021

Apart from Velvet 2, successors of LG’s Q92, LG Stylo, will also reportedly be made by ODMs. Still, LG is said to churn out the next flagship codenamed Rainbow, rollable device(codenamed B Project) on its own. The device, Rainbow, will likely have similarities to the V series with 5G, Snapdragon 8xx SoC, and more.

On the other hand, B Project will be the second output of LG’s Explorer Project says the report. It will likely allow users to pull one of the sides of a screen to roll it out and expand the display. If we recall, the first device out of LG’s Explorer Project was the LG Wing 5G that launched recently in the US, Korea, and India.

Anyway, all of the devices mentioned above including Velvet 2 are likely headed for a 2021 release. However, if the report is true, Rainbow will launch by Q1, 2021 whereas B Project will debut in March of next year.

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