South Korean vendor LG Electronics confirmed speculation it is to close its mobile phone business, after suffering years of declining market share and huge competition from the likes of Apple and Samsung.
In a statement today (5 April), the company noted its decision will enable it to focus resources on its other technology businesses “such as electric vehicle components, connected devices, smart homes, robotics, AI and business-to-business solutions, as well as platforms and services”.
LG also cited 6G as an area of focus: “Moving forward, LG will continue to leverage its mobile expertise and develop mobility-related technologies such as 6G to help further strengthen competitiveness in other business areas.”
Its mobile phone unit is expected to close by 31 July, although customers will continue to be supported with service and software updates.
LG’s news will come as little surprise. Rumors of a market exit have been circulating for months, and reports suggest the company had little interest from prospective buyers.
The unit’s global market share was likely a major obstacle to securing an attractive price: Strategy Analytics data showed it held only a 2 per cent share of the smartphone market in 2020 and ranked as the ninth largest vendor.
News of potentially abandoning the segment first emerged in January, only a week after the company talked-up a rollable smartphone display, the latest attempt by the manufacturer to differentiate its high-end offer with alternative form factors.
Despite attempts to revive its fortunes through regular launches of devices at a range of price points and devising flagships with USPs, the smartphone unit was regularly cited as a blot on the electronic giant’s otherwise positive financial results, with wide losses often reported.
The unit recorded a loss of KRW248.5 billion ($221.9 million) in Q4 2020. Over the last six years the unit’s losses totaled around $4.5 billion.
Ben Wood, chief analyst and CMO at CCS Insight, reflected LG clearly decided it could no longer accept “the endless losses associated with the company continuing with its mobile phone business”.
Wood cited the vendor’s recent attempts to differentiate itself from rivals with the launch of a number of quirky devices, “be that phones with a secondary clip-on screen or the dual-screened LG Wing which opened to form a cross-like shape”. But in hindsight, he said they did little to help the company, not only against giant domestic rival Samsung but also Chinese competitors including Oppo and Huawei.
He cautioned smaller rivals, noting if a company with the scale of LG’s consumer electronics business can struggle in the mobile phone sector, there are question marks on how long other sub-scale manufacturers “can remain in such a highly competitive, over-saturated market ”.
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