(ATF) South Korea’s LG Electronics plans to wind down its loss-making mobile division after failing to find a buyer – the first major smartphone brand to completely withdraw from the market.
Analysts says the decision will leave its 10% share of North American market, where it is the third most-popular brand, is likely to be taken by Samsung Electronics and Apple.
“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,” Ko Eui-young, an analyst at Hi Investment & Securities, said.
LG’s smartphone division has logged nearly six years of losses totalling 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.
Eight years ago, LG was the world’s third-largest smartphone manufacturer behind Samsung and Apple and it later came up with cell-phone innovations such as ultra-wide angle cameras.
But later its flagship models suffered from software and hardware mishaps, while slower software updates saw the brand steadily slip in favour.
Analysts also criticised the company for lack of expertise in marketing compared to its 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.
LG’s current global share is only about 2%. It shipped 23 million phones last year which compares with 256 million for Samsung, according to research provider Counterpoint.
Latin America
In addition to North America, the brand has a sizeable 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, their 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.
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.
Analysts said they were told in a conference call that LG plans to retain its 4G and 5G core technology patents as well as core R&D personnel, and will continue to develop communication technologies for 6G. It has yet to decide whether to license out such intellectual property in the future, they added.
LG will provide service support and software updates for customers of existing mobile products for a period of time which will vary by region, it added.
Talks to sell part of the business to Vietnam’s Vingroup fell through due to differences about terms, sources with knowledge of the matter have said.
LG Elec shares have risen about 7% since a January announcement that it was considering all options for the business.
With reporting by Reuters
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