South Korea’s LG Electronics Inc is to wind down its loss-making mobile division after failing to find a buyer, a move that would make it the first major smartphone brand to completely withdraw from the market.
Its decision to pull out will leave its 10 percent share in North America, where it is the No. 3 brand, to be gobbled up by Samsung Electronics Co and Apple Inc with its domestic rival expected to have the edge.
“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,” Hi Investment & Securities Co analyst Ko Eui-young said.
Photo: AFP
LG’s smartphone division has logged nearly six years of losses totaling about US$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.
In better times, LG was early to market with a number of cellphone innovations including ultra-wide-angle cameras and at its peak in 2013, it was the world’s third-largest smartphone manufacturer behind Samsung and Apple.
Later, its flagship models suffered from software and hardware mishaps, which combined with slower software updates saw the brand steadily slip in favor. Analysts have also criticized the company for lack of expertise in marketing compared with Chinese rivals.
While other well-known mobile brands such as Nokia Oyj, HTC Corp (宏達電) and BlackBerry Ltd have also fallen from lofty heights, they have yet to disappear completely.
LG’s current global share is only about 2 percent. It shipped 23 million phones last year, which compares with 256 million for Samsung, according to research provider Counterpoint.
In addition to North America, it does have a sizeable presence in Latin America, where it ranks as the No. 5 brand.
LG’s smartphone division, the smallest of its five divisions accounting for about 7 percent of revenue, is expected to be wound down by July 31.
In South Korea, the division’s employees would be moved to other LG Electronics businesses and affiliates, while elsewhere decisions on employment would 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 would 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 would provide service support and software updates for customers of existing mobile products for a period of time that would vary by region, it said.
LG shares have risen about 7 percent since a January announcement that it was considering all options for the business.
Talks to sell part of the business to Vietnam’s Vingroup JSC fell through due to differences about terms, sources with knowledge of the matter have said.
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