South Korea’s LG Electronics is set to wind down its loss-making mobile division after failing to find a buyer, a move that will make it the first major smartphone brand to completely withdraw from the market.
Its decision to pull out will leave its 10% share in North America, where it is the No. 3 brand, to be taken up by Samsung Electronics and Apple with its domestic rival expected to have the edge.
“In the United States, LG has targeted mid-priced – if not ultra-low – models and that means Samsung, which has more mid-priced product lines than Apple, will be better able to attract LG users,” said Ko Eui-young, an analyst at Hi Investment & Securities.
LG’s smartphone division has logged nearly six years of losses totaling some $4.5 billion. Dropping out of 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 number of cell phone innovations including ultra-wide angle cameras and at its peak in 2013, it was the world’s third-largest smartphone manufacturer behind Samsung and Apple.
But later, its flagship models suffered from both software and hardware mishaps which combined with slower software updates saw the brand steadily slip in favour. Analysts have also criticised the company for lack of expertise in marketing compared to Chinese rivals.
While other well-known mobile brands such as Nokia, HTC and Blackberry have also fallen from lofty heights, they have yet to disappear completely. According to research provider, Counterpoint, LG with current global share of only about 2%, shipped 23 million phones last year which compares with 256 million for Samsung.
In addition to North America, LG has a sizable presence in Latin America, where it ranks as the No. 5 brand while rival Chinese brands such as Oppo, Vivo and Xiaomi do not have much of a presence in the United States, in part due to frosty bilateral relations, and Samsung’s low to mid-range product offerings are set to benefit from LG’s absence in Latin America, analysts said.
LG’s smartphone division, the smallest of its five divisions accounting for about 7% of revenue, is expected to be wound down by July 31, 2021.
In South Korea, the division’s employees will be moved to other LG Electronics businesses and affiliates, while elsewhere decisions on employment will be made at the local level. LG will provide service support and software updates for customers of existing mobile products for a period of time which will vary by region.