LG Electronics Inc. of South Korea announced plans to wind down its loss-making mobile division, making it the first big Smartphone brand to exit the market entirely. The decision to exit means that its 10% market share in North America, where it is the third most popular brand, will be devoured by Smartphone behemoths Apple Inc and Samsung Electronics. The division has lost nearly $4.5 billion in losses over the last six years, and exiting the highly competitive sector, will enable LG to concentrate on growth areas such as electric vehicle parts, connected devices, and smart homes, according to a statement.
In better days, LG was first to market with a range of mobile phone technologies, such as ultra-wide angle cameras, and was once the world’s third-largest Smartphone maker, behind only Samsung and Apple. However, its flagship models later suffered from both software and hardware flaws, which, when coupled with slower software updates, saw the company slowly fall out of favour. Analysts have also criticised the company for lacking marketing experience in comparison to Chinese competitors.
Its global market share is currently about 2%. According to research firm Counterpoint, it shipped 23 million phones last year, compared to 256 million for Samsung. In addition to North America, it has a significant presence in Latin America, where it is the No. 5 brand.
“In South America, Samsung and Chinese companies including Oppo, Vivo, and Xiaomi are expected to gain in the low to mid-end segment,” Park Sung-soon, an analyst at Cape Investment & Securities, said. Other well-known Smartphone brands, such as Nokia, HTC, and Blackberry, have also fallen from lofty heights, but they have yet to vanish entirely. LG’s mobile division – the smallest of the company’s five divisions, accounting for around 7% of sales – is set to close down on the coming July 31.
Employees from the division will be transferred to other LG Electronics companies and affiliates in South Korea, while decisions on jobs will be taken at the local level elsewhere. LG will offer service support and software upgrades to existing mobile product customers, for a period of time that will differ by country, the company said. Negotiations to sell a portion of the firm to Vietnam’s Vin group fell through, due to disagreements in terms, according to sources familiar with the situation.
The announcement has put an end to rumours about the future of LG’s Smartphone market, which the company said earlier this year will be evaluated. LG’s departure will provide an opportunity for Apple and Samsung to gain more customers, especially in the United States, where LG’s market share was 9% in December 2020, according to Counterpoint Research.
