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LG to Close Factory in South Korea, Move Smartphone Production to Vietnam

The South Korean multinational electronics company has production plants in South Korea, China, Vietnam, Brazil and India.

In an effort to offset recent financial losses in its smartphone-making operations, LG Electronics will shut down its Pyeongtaek Factory in the south of Seoul, which is responsible for manufacturing most of LG's high-end models, Yonhap News Agency reports. The production will be moved to Vietnam at its factory in Hai Phong by the end of 2019.

"The plan is a strategic move to improve the profitability of its smartphone business amid a slump in the global smartphone market and increased demand for home appliance products, such as air purifiers and dryers," LG Electronics said in a statement.

LG Electronics has been struggling to make a profit amid competition from its South Korean counterpart Samsung Electronics, the rising power of Chinese's Huawei Technology and giants such as Apple. In the past three years, the company's smartphone business reported KRW2.8 trillion (US$2.5 billion) in financial losses.

Despite this, LG Electronics insists that it will not pull out of the mobile phone production market. "The company's dilemma is that it cannot give up the smartphone business because [the devices] will be at the heart of the internet of things," Kim Ji-san, an analyst at Kiwoom Securities, told Nikkei Asian Review

This production shift also means that the production capacity of its Hai Phong's plant will increase by 83% to 11 million handsets.

[Photo via Nikkei Asian Review]

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