LG becomes the first major smartphone brand to withdraw from the market

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) – South Korea’s LG Electronics Inc said on Monday it will shut down its loss-making mobile division, a move that will make it the first major smartphone brand to withdraw entirely from the market.

Its decision to withdraw will leave its 10% stake in North America, where it is the No. 3 brand, to be eaten up by the smartphone titans Apple Inc and Samsung Electronics.

The division has posted nearly six years of losses totaling about $ 4.5 billion, and leaving the fiercely competitive sector would allow LG to focus on growth areas such as electric vehicle components, connected devices and smart homes, it said in a statement.

In better times, LG was early to market with a host of cell phone innovations, including wide-angle cameras, and once in 2013 it was the world’s third-largest smartphone maker behind Samsung and Apple.

But later, its flagship models suffered from software and hardware setbacks that, combined with slower software updates, caused the brand to steadily lean in favor. Analysts have also criticized the company for its lack of marketing experience compared to its Chinese rivals.

Currently, its global share is only around 2%. It shipped 23 million phones last year, which compares to 256 million for Samsung, according to research provider Counterpoint.

In addition to North America, it has a considerable presence in Latin America, where it ranks as the number 5 brand.

“In South America, Samsung and Chinese companies such as Oppo, Vivo and Xiaomi are expected to benefit in the low to mid-range segment,” said Park Sung-soon, an analyst at Cape Investment & Securities.

While other well-known mobile phone brands such as Nokia, HTC, and Blackberry have also fallen from heights, they have not yet completely disappeared.

LG’s smartphone division, the smallest of its five divisions, accounting for about 7% of revenue, is expected to be liquidated by July 31.

In South Korea, the division’s employees will relocate to other LG Electronics companies and subsidiaries, while elsewhere employment decisions will be made locally.

LG will provide service support and software updates for customers of existing mobile products for a period of time that will vary by region, he added.

Talks to sell part of the business to Vietnam’s Vingroup failed due to differences over terms, sources with knowledge of the matter said.

(Reporting by Joyce Lee and Heekyong Yang; Edited by Edwina Gibbs)

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