South Korea’s LG Electronics has announced that it will shut down its mobile division, making it the first major device manufacturer to fully exit the smartphone market.
As reported by Reuters, LG confirmed the decision after failing to find a buyer for its device unit, which across the past six years has registered consistent losses of around US$4.5 billion. LG’s smartphone unit is the smallest of its five divisions, generating around 7% of group revenue. Negotiations with Vietnam’s Vingroup over a possible acquisition failed to agree on the terms of sale.
LG expects to shutter the unit by 31st July this year, allowing the group to shift its focus to growth areas “such as electric vehicle components, connected devices, smart homes, robotics, AI and business-to-business solutions, as well as platforms and services”.
While other brands – including BlackBerry, HTC and Nokia - have seen their share of the device market plummet, they have not yet wound up production entirely.
Currently, LG’s share of the global device market stands at 2% - a far cry from its heyday. In 2013, it was the world’s third-largest smartphone brand after Samsung and Apple; Counterpoint Research reports that in 2020 it shipped 23 million devices compared to Samsung’s 256 million.
The brand has something of a foothold in the Americas, placing third in the North American market with a 10% share, and taking fifth place across Latin America. Counterpoint Research analyst Tarun Pathak noted that LG’s premium devices often underwhelmed, leaving it to compete in the mid-tier device market.
According, Pathak predicted that “it will be mostly the Chinese and mid-tier brands benefiting through the LG exit. In its key market like USA – Samsung, Motorola, HMD mostly (ZTE, Alcatel to a lesser extent) will benefit, while Xiaomi, Motorola will benefit in LATAM and Samsung in Korea.”
Geopolitical relations have seen Chinese firms somewhat frozen out of the US market, but brands such as Oppo, Vivo and Xiaomi perform well in Latin America due to their low and mid-tier pricing, as well as their effective marketing. Accordingly, they will likely see their market shares in this region following LG’s exit.
LG is not out of the telecoms sector by any means, confirming that it will retain its 4G and 5G core technology patents along with its R&D department, and stating: “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.” It stopped short of confirming whether it would license out its technologies in the future.
