South Korean electronic giant, LG Electronics Inc, has said that it will be closing down its loss-making mobile division after failing to find a buyer.
This move by LG is set to make it the first major smartphone brand to completely withdraw from the market.
According to a report from Reuters, this disclosure is contained in a statement issued by LG on Monday in Seoul.
LG had said that its smartphone division has recorded total losses of about $4.5 billion in almost 6 years adding that shutting down that division would allow LG to focus on growth areas like electric vehicle components, connected devices, and smart homes.
The decision by LG, to shut down its mobile division will leave its 10% share in North America, where it is the Number 3 brand, to be quickly taken up by Samsung Electronics and Apple Inc with its domestic rival expected to have the edge.
An analyst at Hi Investment and Securities, Ko Eui-Young, said, “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.’’
LG, the world’s third-largest smartphone manufacturer behind Samsung and Apple, entered the market quite early with a number of cell phone innovations like ultra-wide-angle cameras and so on.
However, its setback started with its flagship models suffering from both software and hardware mishaps. This, combined with slower software updates saw the brand steadily going out of favour. Analysts have also criticized the company for its lack of expertise in marketing compared to its Chinese rivals.
Although other well-known mobile brands such as Nokia, HTC, and Blackberry are all going through a rough patch as they have 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 are expected to be integrated into other LG Electronics businesses and affiliates, while in other countries, the employment decisions will be made at the local level.
LG Electronics shares have risen about 7% since a January announcement that it was considering all options for the business.
What this means
- LG’s withdrawal from the smartphone business had been on the horizon for some years now due to losses recorded by that division.
- The firm which was once considered a pioneer of the Andriod operating system had struggled for increased sales in the face of stiff competition from the likes of Huawei. The closing down of the division will allow the smartphone company to concentrate on their more profitable divisions.