LG Electronics Inc. of South Korea reported on Monday that it would close its loss-making mobile division, making it the first major smartphone maker to leave the market entirely.
Because of the LG’s decision to exit, Apple Inc. and Samsung Electronics will be able to take over its 10% market share in North America, where it is the No. 3rd brand. LG said in a statement that exiting the highly competitive sector would allow it to concentrate on growth areas such as electric vehicle parts, connected devices, and smart homes, where it has logged nearly six years of losses totalling $4.5 billion. LG was once the world’s third-largest smartphone maker, behind Samsung and Apple, and was first to market with a range of mobile phone technologies, including ultra-wide-angle cameras, in better days.
However, its flagship models later suffered from both, the software and hardware flaws, which, when coupled with slower software updates, saw the company gradually lose favour. Analysts have also chastised the firm for lacking marketing experience in relation to Chinese competitors. Its global market share is currently less than 2%. According to research firm Counterpoint, it shipped 23 million phones last year, while Samsung shipped 256 million. It is the No. 5th brand in Latin America, in addition to North America.
Samsung and Chinese companies including Oppo, Vivo, and Xiaomi are expected to gain in the low to mid-end segment in South America, according to Park Sung-soon, an analyst at Cape Investment & Securities. Other well-known smartphone brands, such as Nokia, HTC, and Blackberry, have also plummeted from lofty heights, but are yet to fully vanish. LG’s smartphone division, which accounts for around 7% of the company’s sales, will be shut down.
Employees from the division will be transferred to other LG Electronics companies and affiliates in South Korea, while job decisions will be taken locally elsewhere. Customers of current mobile devices will receive service support and software upgrades for a period of time that will differ by country, LG said. According to sources familiar with the situation, talks to sell a portion of the company to Vietnam’s Vingroup fell through, due to disagreements over terms.
