Seoul: South Korea’s LG Electronics said on Monday that it will close its loss-making mobile phone division. This move will make it the first major smartphone brand to completely withdraw from the market.
Its decision to pull out will leave its 10% share in North America, where it is the No. 3 brand, to be gobbled up by smartphone titans Apple Inc and Samsung Electronics.
The division has logged nearly six years of losses totalling some $4.5 billion, and 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 has launched many innovative mobile phone products including ultra-wide-angle cameras in the market, and in 2013 it became the world’s third largest smartphone manufacturer after Samsung and Apple.
But later, its flagship model suffered software and hardware disasters, coupled with the slower software update speed, so the brand gradually became favored. Analysts also criticized the company’s lack of marketing expertise compared with its Chinese competitors.
Currently, its global share is only 2%. According to research provider Counterpoint, Samsung’s mobile phone shipments were 23 million units last year, while Samsung’s shipments were 256 million units.
Except for North America, it does have a considerable share in Latin America, ranking fifth in Latin America.
“In South America, Samsung and Chinese companies such as Oppo, Vivo and Xiaomi are expected to benefit in the low to mid-end segment,” said Park Sung-soon, an analyst at Cape Investment & Securities.
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 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.
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.
People familiar with the matter said that due to differences in terms, negotiations to sell part of the business to Vietnam Vingroup failed.