South Korea’s LG becomes the first major smartphone brand to withdraw from the market

SEOUL (Reuters) – South Korea’s LG Electronics Inc is shutting down its loss-making mobile division after failing to find a buyer, a move that will make it the first major smartphone brand to withdraw entirely from the market.

FILE PHOTO: A man talking on his phone walks past the LG Electronics logo during the 2016 Korea Electronics Show in Seoul, South Korea, on October 27, 2016. REUTERS / Kim Hong-Ji / File Photo

Its decision to withdraw will leave its 10% stake in North America, where it is the No. 3 brand, to be eaten up by Samsung Electronics and Apple Inc, with its domestic rival expected to have the upper hand.

“In the United States, LG has focused on mid-priced, if not ultra-low-priced models, and that means that Samsung, which has more mid-priced product lines than Apple, will be better able to appeal to LG users,” he said. Ko Euyung, analyst at Hi Investment & Securities.

LG’s smartphone division has posted nearly six years of losses totaling around $ 4.5 billion. 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 at its peak 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.

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 current 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.

While rival Chinese brands like Oppo, Vivo, and Xiaomi don’t have much of a presence in the United States, partly due to cold bilateral relations, their low- and mid-range product offerings and those of Samsung will benefit from LG’s absence. In America. America, analysts said.

LG’s smartphone division, the smallest of its five divisions that account 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.

Analysts said they were told in a conference call that LG plans to retain its 4G and 5G core technology patents, as well as core R&D staff, and will continue to develop communication technologies for 6G. It has yet to decide whether to license such intellectual property in the future, they added.

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.

Shares of LG Elec are up about 7% since a January announcement that it was considering all options for the business.

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


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