SEOUL (Reuters) – South Korean LG Electronics Inc will phase out its loss-making mobile division after failing to find a buyer, a move that will make it the first major smartphone brand to withdraw from the market completely.
The decision to withdraw means that its 10% share of North America, where the brand ranks No. 3, is swallowed up by Samsung Electronics and Apple Inc, while its domestic rival is expected to be ahead.
“In the United States, LG has focused on 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,” said Ko Eui-young, an analyst at Hi Investment & Securities.
LG’s smartphone division has lost nearly six years worth a total of about $ 4.5 billion. Leaving the fiercely competitive industry could 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 entered the market early with a number of mobile phone innovations, including ultra-wide-angle cameras, and at its peak in 2013, it was the third largest smartphone manufacturer in the world after Samsung and Apple.
Later, however, its flagship models suffered from both software and hardware problems, which, coupled with slower software updates, kept the brand steadily in favor. Analysts have also criticized the company for its lack of marketing expertise compared to its Chinese rivals.
While other well-known mobile brands such as Nokia, HTC and Blackberry have also fallen from lofty heights, they have yet to disappear altogether.
LG’s current global share is only about 2%. It shipped 23 million phones last year, up from 256 million for Samsung, according to research provider Counterpoint.
In addition to North America, it also has a significant presence in Latin America, where it is number 5.
While rival Chinese brands such as Oppo, Vivo and Xiaomi don’t have much of a presence in the United States, partly due to icy bilateral relationships, their and Samsung’s product offering will benefit from LG’s absence in Latin. America, analysts said.
LG’s smartphone division, the smallest of the five divisions that account for about 7% of sales, is expected to be phased out on July 31.
In South Korea, the division’s employees will be transferred to other LG Electronics companies and affiliates, while elsewhere employment decisions will be made at the local level.
Analysts said they were told in a conference call that LG plans to keep its 4G and 5G core technology patents and core R&D personnel and continue to develop communication technologies for 6G. It has yet to decide whether it will license such intellectual property in the future, she added.
LG will provide service support and software updates for customers of existing mobile products for a period that may vary by region.
Talks to sell part of the business to the Vingroup in Vietnam have failed due to differences in terms, sources say.
Shares of LG Elec are up about 7% since a January announcement that it was considering all options for the company.
Reporting by Joyce Lee and Heekyong Yang; Editing by Edwina Gibbs