South Korean LG Electronics on Monday said it would end its loss-making mobile division – a move that is expected to make it the first major smartphone brand to pull out of the market altogether.
Its decision to pull out will leave its 10% share in North America, where it is the No.3 brand, to be swallowed up by the smartphone titans Apple and Samsung Electronics.
The division recorded nearly six years of losses totaling some $ 4.5 billion (roughly Rs.3,010 crore), and abandoning the fiercely competitive industry would allow LG to focus on growth areas such as components of electric vehicles, connected devices and smart homes. said in a statement.
In better times, LG entered the market early with a number of cellphone innovations including ultra wide angle cameras and was once in 2013 the third largest smartphone maker in the world behind Samsung and Apple. .
But later, its flagship models suffered from both software and hardware crashes which, combined with slower software updates, saw the brand steadily slip in favor. Analysts also criticized the company for its lack of marketing expertise compared to its Chinese rivals.
Currently, its global share is only around 2 percent. It shipped 23 million phones last year, compared to Samsung’s 256 million, according to research provider Counterpoint.
Besides North America, it has a significant presence in Latin America, where it ranks 5th.
“In South America, Samsung and Chinese companies such as Oppo, Vivo and Xiaomi are expected to benefit from the low to mid segment,” said Park Sung-soon, analyst at Cape Investment & Securities.
While other well-known mobile brands such as Nokia, HTC and Blackberry have also fallen from heights, they are not yet completely gone.
LG’s smartphone division – the smallest of its five divisions, accounting for around 7% of revenue – is expected to close by July 31.
In South Korea, the division’s employees will be transferred to other LG Electronics companies and subsidiaries, while elsewhere, employment decisions will be made at the local level.
LG will provide service support and software updates for existing mobile product customers for a period that will vary by region, he added.
Talks to sell part of the business to Vietnamese Vingroup have failed due to differences in terms, sources with knowledge of the matter said.
© Thomson Reuters 2021
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