The company has exited the smartphone business after being in the industry for nearly two decades.
South Korea’s LG Electronics will be winding down its mobile division, making it as the first major smartphone brand to completely withdraw from the market. The business is anticipated to be wound down by July 31.
Why This Happened?
Because of increasing losses.
The company has been recording nearly six years of losses totalling some $4.5 billion. Despite enjoying success in the early 2010s, the company’s flagship models suffered from both software and hardware mishaps later. On top of this, slower software updates made LG an unfavourable smartphone brand.
Analysts also criticized the firm for lack of expertise in marketing compared to Chinese competitors. The picture of how LG is failing against its competitors can be clearly seen if you look at the number of phones shipped by the company in 2020. According to research firm Counterpoint, LG shipped 28 million phones last year and during the same year, Samsung shipped 256 million phones.
The company’s decision to withdraw completely from the smartphone market comes after it failed to sell the business to other firms. Earlier in January, the company’s CEO said that all options were on the table for the loss-making operation. The firm was said to be in talks with Germany’s Volkswagen AG and Vietnam’s Vingroup JSC on possible sale of the smartphone business. However, last month, a source told Bloomberg that the negotiations about a potential sale has been failed.
Consumer Electronics: LG might have been withdrawing the smartphone business, but it still has a strong consumer electronics business, particularly with home appliances and televisions. After Samsung, LG is the world’s second best-selling TV brand.
Electric Car Gear Manufacturing: Earlier in December, the company launched a joint venture with automotive supplier Magna International that will make key components for electric cars. The joint venture is valued at $1 billion, and it will manufacture e-motors, inverters and onboard chargers.
4G, 5G & 6G: The company is looking to retain its 4G and 5G core technology patents as well as core R&D personnel, analysts said they were told in a conference call, writes Reuters. They also said that the company will continue to develop communication technologies for 6G. The firm is yet to decide whether to licence out such intellectual property in the future.
Even though LG is exiting its smartphone business, we hope we could see LG making a mark in other industries in the future. On the other hand, Samsung and LG’s Chinese rivals Like Oppo, Vivo etc., might benefit from this exit.