South Korean multinational electronics company LG Electronics has not had success in its smartphone business as of late – not only has it been unable to record profits, but it has also incurred severe losses for several years in a row, costing the company nearly $4.5 billion in revenue. In an official statement on Monday, the South Korean manufacturer finally confirmed that it would be abiding by the decision approved by its board of directors and shut down its smartphone-making division.
In the press release, the company confirmed the decision of pulling out of the smartphone market, saying that its decision would “enable the company to focus resources in growth areas such as electric vehicle components, connected devices, smart homes, robotics, artificial intelligence, and business-to-business solutions, as well as platforms and services.” This follows the firm’s statement in January when it said it was reviewing the direction of its smartphone business.
LG, which ranks third in the smartphone market in the US, confirmed that the existing smartphone line-up would be available for purchase until the inventory lasts (which means you can buy a phone as long as they are not out of stock) and the firm would continue to provide support and software updates for existing users “for a period of time which will vary by region.” LG would also work with its business partners and suppliers throughout the process of closing down the mobile business. The fates of its rollable phone and the LG Rainbow remain unknown.
It is expected that the complete shutdown of the smartphone manufacturing division would be completed by July 31.
“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. Core technologies developed during the two decades of LG’s mobile business operations will also be retained and applied to existing and future products,” the statement read. It added that the details “related to employment will be determined at the local level.”
It is sad to see a firm that was once the world’s third-largest smartphone manufacturer (behind only Samsung and Apple) now falling to such depths. After the initial success, its flagship models in later days suffered from both software and hardware mishaps. Slower software updates and lack of marketing expertise were some other factors that aided LG’s fall from grace. According to research firm Counterpoint Research, LG had shipped only 23 million phones, compared to the 256 million shipped by Samsung. It is thus, of little surprise that LG would be made to leave the market.
Once a strong rival to Samsung, LG has failed to survive in the intensely competitive market of mid-range and high-end smartphones. The advent and soaring popularity of Chinese firms like Xiaomi and Oppo did not help its cause either, and LG has now joined brands like Nokia and BlackBerry who have fallen from lofty heights. The company’s confidence in a turnaround by the end of the year via its ‘Explorer Project’ has not been successful.
“LG was too much dependent on two markets: Korea (KR) & North America (NA),” said Neil Shah, Partner at Counterpoint. “One thing which has helped LG stay afloat for so many years is their vertical integration. They are a ‘mini Samsung,’” he said, pointing to LG Display (displays), LG Chem (batteries), LG Innotek (camera, IoT/auto modules), Silicon Works (semi), and LG Electronics (consumer goods).