Lee Joyce and Yang Xiy
Seoul (Reuters)-South Korea’s LG Electronics will close its loss-making mobile phone 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 withdraw will give it a 10% share of the third-ranked brand in North America, which will be swallowed by Samsung Electronics and Apple Inc., while its domestic competitors are expected to take advantage.
“In the United States, LG is targeting mid-priced (not even ultra-low-priced) models, which means that Samsung, which has more mid-priced product lines than Apple, will be able to attract LG users better,”
LG’s smartphone division has recorded losses for nearly six years, with a total loss of approximately US$4.5 billion. It said in a statement that withdrawing from highly competitive industries will allow LG to focus on growth areas such as electric vehicle parts, connected devices and smart homes.
In better times, LG has already launched many innovative mobile phone products including ultra-wide-angle cameras in the market, and reached its peak in 2013. It is the third largest smartphone manufacturer in the world after Samsung and Apple. .
But later, its flagship model suffered software and hardware disasters, coupled with the slower software update speed, so the brand gradually became favored. Analysts also criticized the company’s lack of marketing expertise compared with its Chinese competitors.
Although other well-known mobile brands such as Nokia, HTC and BlackBerry have also fallen from the heights, they have not completely disappeared.
LG’s current global share is only 2%. According to research provider Counterpoint, Samsung’s mobile phone shipments were 23 million units last year, compared with 256 million Samsung’s mobile phones.
Except for North America, it does have a considerable share in Latin America, ranking fifth in Latin America.
Although rival Chinese brands such as Oppo, Vivo and Xiaomi do not have a high share in the United States, partly due to poor bilateral relations, their mid- and low-end products with Samsung will benefit from LG’s absence in Latin, analysts say, the United States.
LG’s smartphone division is the smallest of the five divisions, accounting for approximately 7% of revenue, and is expected to end on July 31.
In South Korea, employees of this department will be transferred to other businesses and branches of LG Electronics, while employment decisions in other places will be made locally.
Analysts said that they were told during the conference call that LG plans to retain its 4G and 5G core technology patents and core R&D personnel, and will continue to develop 6G communication technology. They added that they have not yet decided whether to license such intellectual property rights in the future.
LG added that LG will provide service support and software updates to customers of existing mobile products for a period of time, depending on the region.
People familiar with the matter said that due to differences in terms, negotiations with Vietnam Vingroup to sell part of the business could not be reached.
Since it was announced in January that it was considering all options for the business, LG Elec’s stock price has risen about 7%.
(Reporting by Joyce Lee and Heekyong Yang; editing by Edwina Gibbs)