LG quits smartphone business as losses mount

LG Electronics said in a regulatory filing that its mobile communications (MC) unit will no longer produce and sell handsets after July 31, citing its long slump and fierce competition in the industry.

Seoul/New Delhi:LG Electronics said on Monday that it will withdraw from the mobile business after years of money-losing performance amid intensifying competition with bigger rivals.

The South Korean tech powerhouse said in a regulatory filing that its mobile communications (MC) unit will no longer produce and sell handsets after July 31, citing its long slump and fierce competition in the industry.

The decision came two months after the company said its MC division is open to "all possibilities" for its future operations.

LG's mobile business has been in the red since the second quarter of 2015. Its accumulated operating losses reached 5 trillion won (US$4.4 billion) last year.

LG, once the world's third-largest handset maker, reportedly had talks with Vingroup of Vietnam and Volkswagen of Germany to sell the mobile business, but the talks fell through, according to industry insiders.

LG said its exit from the mobile business will lead to a decline in revenue for the company in the short term but will eventually improve its financial status and management efficiency in the longer period, reports Yonhap news agency.

Why is LG shutting down its global smartphone business?

LG first entered the smartphone market in 2010 with Optimus after Apple paved the way with the iPhone in 2007.

Once becoming the world's third-largest handset maker, the fortunes have started dwindling for LG as it has been sandwiched by Apple and Samsung in the premium segment, and Chinese players in the budget phone sector.

"The market share of LG smartphones has continued to decline after reaching about 4 percent in the second quarter of 2017," Lim Su-jeong, an analyst at technology market research firm Counterpoint Research, told IANS.

In fact, it has been below 2 per cent since the third quarter of 2019, he added.

To reduce costs, the company shifted its smartphone production base to Vietnam while expanding outsourcing deals.

LG also placed its bet last year on the Explorer Project, its new mobile category highlighted by a different form factor, and released the Wing, a rotating dual-screen smartphone.

However, such efforts were not enough for the company to break away from its extended slump.

LG has a very small share of Indian smartphone market

According to Prachir Singh, Senior Research Analyst at Counterpoint, India had never been a strategic market for LG and it reflects in its negligible share in the country's overall smartphone market.

“Korea, North America and Latin America were focus markets for LG mobiles. India had never been on their radar,” Prachir Singh told ETV Bharat.

“LG’s market share in India’s overall smartphone market was a meagre 0.15 per cent in 2019 and it was at 0.30 per cent in 2020,” he added.

On being asked why LG smartphones failed to make a mark among Indian users, Prachir said: “No doubt, LG makes fantastic products. Even they supply components like displays and batteries to other manufacturers. But, when it comes to marketing, they are nowhere near India’s top five brands like Xiaomi, Samsung, etc.”

(With Agency Inputs).