South Korean vendor LG Electronics revealed that they had stopped the cellular division which had been losing money in the last few years. The official decision was taken on Monday (5/3/2021), making LG the first major smartphone brand to completely withdraw from the market.
LG’s withdrawal from the smartphone market will leave 10% of the market share controlled in the North American region. In strategic areas, LG is the third major player behind US giants Apple and Samsung Electronics. Apart from North America, LG has a sizable presence in Latin America, ranking the brand number five.
In a statement, as reported by Reuters, LG’s mobile division had recorded nearly six years of losses. Unmitigated, around $ 4.5 billion. LG’s smartphone division – the smallest of its five divisions, which accounts for about 7% of revenue – is expected to be completed by July 31.
LG’s withdrawal from the highly competitive industry will allow it to focus on areas of growth such as electric vehicle components, connected devices and smart homes.
In its heyday, LG was known as one of the innovative vendors. The Seoul-based manufacturer marketed earlier with a number of cellphone innovations including an ultra-wide-angle camera and was once the third largest smartphone manufacturer in the world in 2013 after Samsung and Apple.
Later however, the flagship model suffered from software and hardware glitches combined with slower software updates. Analysts also criticized the company for its lack of expertise in marketing compared to China’s more aggressive severers.
Inability to compete with Chinese vendors, LG’s market share continues to shrink every year. Currently, the global share is only around 2%. The Counterpoint report says that LG shipped only 23 million cell phones last year. Far compared to the 256 million sent by compatriot Samsung.
LG’s decision to completely withdraw from the smartphone business will of course benefit its competitors.
“In South America, Samsung and Chinese companies such as Oppo, Vivo and Xiaomi are expected to benefit in the low to mid-end segment,” said Park Sung-soon, an analyst at Cape Investment & Securities.
In South Korea, employees of the division will be transferred to other LG Electronics businesses and affiliates, while elsewhere employment decisions will be made at the local level.
Although it has resigned, LG will provide service support and software updates to existing mobile phone product customers for a period that varies by region, he added.
Previously in order to save the mobile division, LG has been in talks to sell part of the business to Vingroup Vietnam. But it failed due to differences in requirements, said a source with knowledge of the matter.
Apart from the unsuccessful sales to Vingroup, LG’s decision to leave the cellular business was actually voiced by LG officials earlier this year.
Reporting from The Verge , LG CEO Kwon Bongseok has announced to employees that the company is considering making major changes to the smartphone business.
Through an internal memo to its staff which LG did not deny, it hinted that there would be a change in the direction of LG’s smartphone business going forward. In the memo, Kwon revealed that the company is considering all possible measures, including the sale, withdrawal and reduction of the smartphone business.