Phone business

Why LG is leaving the mobile phone business

In the late 1990s and early 2000s, every electronics manufacturer worth their salt was making cell phones. Mobiles were no longer an expensive business accessory, but an essential consumer good and there were huge opportunities in a market that could accommodate many entrants.

Much of the innovation was hardware-centric, and the period saw rapid advances in technology such as cameras and color displays, coupled with experimental form factors.

But the arrival of the smartphone changed everything – even stuffy BlackBerrys became desirable devices – and there were bound to be casualties.

Many pioneers of the first wave of mobile phones fell into oblivion or left the market altogether. The demise of BlackBerry and Nokia were high profile symbols of this changing of the guard, but now that we are entering a new era of 5G-centric hyperconnectivity, we can add LG to the list.

LG unit

The South Korean electronics giant was one of the leaders of the pre-smartphone era, capable of producing innovative and eye-catching devices. In 2006, the LG “Chocolate” was a slider phone that became a real fashion item, much like the iconic Motorola Razr flip phone, and was the best-selling mobile phone of all time.

Released the following year, the legacy of the LG Prada was even greater, as it was the very first mobile with a capacitive touchscreen – showing that LG was at the top of its game.

LG Prada 3

The LG Prada has proven to be a popular choice (Image credit: future)

That momentum didn’t last forever, but even as the industry consolidated around just two mobile platforms – iOS and Android – LG remained relevant as a manufacturer. It was even selected by Google to build its “Nexus 4” handset, designed to be a white label reference model for its Android operating system in 2012. Meanwhile, its flagship “G” series of handsets consolidated the company’s position as a solid ‘number three’ in the market.

But as the decade progressed, LG’s challenges multiplied as the market became more competitive and saturated. Samsung has become increasingly synonymous with the Android platform at premium prices, while more affordable but still feature-rich devices from Chinese vendors have secured huge swathes of the mid-range segment.

On the high end, only Huawei’s long-term bet seemed able to challenge the Apple-Samsung duopoly before the Chinese firm ran into political difficulties, while the likes of Oppo and Xiaomi grew rapidly to clean up the middle. of the month. premium segment – ​​especially in emerging markets. As these brands have established credibility, LG’s heritage has become less of an advantage.

Market challenges

LG’s more recent flagship devices have failed to make a serious impact on consumers either – a far cry from the heady days of Chocolate. While a bright spot has been the US, where its devices have proven popular historically and where it remains number three, its market share has hovered between 9% and 13% lately.

However, with a global share of just 2% and losses running into the billions, LG had been under pressure to pull the plug.

“The question over the past few months has not been whether LG will exit the mobile business, but how. Rumors had been circulating that LG was in talks with various handset makers to continue with LG-branded smartphones,” said Ben Wood, Head of Research at CCS Insight.

“But given the high value of the LG logo on other consumer electronics and major appliances, LG management likely decided that the money offered was not worth the loss of control and any potential damage to its reputation. “

Wood suggests that the global chip shortage has also been a factor: “Unlike domestic rival Samsung, LG has undoubtedly struggled to secure stable supplies of chips and other components for its smartphones. This added hassle of bringing devices to market, and doing so at a loss, was likely a major factor in LG’s cut or continue decision. This further highlights the incredible benefits of scale: major component suppliers such as Qualcomm will go first to Apple, Samsung and Xiaomi.

LG chocolate

The LG Chocolate has also won many fans over the years (Image credit: LG)

There will be many who will lament the demise of LG. Those of us who have followed the industry have fond memories of its innovation and the diversity it has brought, especially when it comes to design. Meanwhile, there is clearly demand in the United States, where Chinese suppliers are mostly excluded. but those customers will likely be served by Alcatel, Nokia devices from HMD Global, or even cheaper devices from Samsung and Apple.

The mobile phone market is much more mature and cutthroat than the one LG first entered a few decades ago, and the opportunities for that lie elsewhere. 5G (and 6G) ​​networks will enable a whole world of new connected applications that go beyond a single device.

The disappearance of LG’s mobile ambitions serves as proof of that competitiveness – and a warning against complacency for current executives.

“There was a time when LG was part of an exclusive trinity of handsets, along with Nokia and Samsung. Now there’s only one left. We hope Samsung notes how fickle the public can be.