A man wearing a mask, walks in front of LG’s headquarters in Seoul on April 5, 2021.
South Korea’s LG Electronics said Monday (April 5) that it will end its cell phone business, which has been losing money for years, and make a mass transfer of more than 3,700 people, in its mobile business unit. The move will make LG the first major smartphone brand to exit the market completely.
According to Yonhap News Agency, LG Electronics has been operating the cell phone business for 26 years, but the decision to exit the market was made as the mobile division continued to underperform amid increasing competition.
LG said the company will focus on internal resource consolidation, concentrate on its core business and restructure its business structure. The official end of the division is expected to take place on July 31.
Before announcing the end of the business, LG Electronics had hoped to sell the unit to Vietnam’s Vingroup Group JSC (VIC) or Germany’s Volkswagen on Jan. 20 this year, but neither made progress.
LG’s mobile business unit had about more than 3,700 employees as of the third quarter of last year. The company said most of the mobile division’s employees are R&D manpower, so personnel transfers will not be much of a problem.
LG Electronics started its cell phone business in 1995 and had become the world’s No. 3 smartphone brand in 2013 after Samsung and Apple. However, for nearly six years from the second quarter of 2015 to the fourth quarter of 2020, it has been losing money continuously, with cumulative losses amounting to 5 trillion won (about $4.5 billion).
LG phones on display at a telecom store in Seoul, South Korea, April 5, 2021.
According to Reuters, LG cell phones account for about 10% of the market share in North America, the third largest brand in the region. After LG’s withdrawal from the market, the market share will be divided by South Korea’s Samsung Electronics and Apple, and because LG has been specializing in the mid-price market, Samsung is expected to have an advantage.
LG said in a statement that exiting the highly competitive industry of cell phones will allow LG to focus on growth areas such as electric vehicle components, connected devices and smart homes.
LG cell phones currently have a global share of only about 2 percent. LG shipped 23 million cell phones last year, as a comparison to Samsung’s 256 million, Reuters quoted market researcher Counterpoint as saying.
In addition to North America, it also has a considerable presence in Latin America, where LG is the fifth-ranked brand.
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