South Korea’s LG becomes the first major smartphone brand to withdraw from the market

SEOUL (Reuters) – South Korea’s LG Electronics Inc will close its loss-making mobile division after failing to find a buyer, a move that should make it the first major smartphone brand to withdraw completely from the market.

Its decision to withdraw will leave its 10% stake in North America, where it is brand number 3, to be swallowed up by Samsung Electronics and Apple Inc, with its domestic rival expected to have the upper hand.

“In the United States, LG is targeting mid-priced models – if not ultra-low – and that means that Samsung, which has more mid-priced product lines than Apple, will be better able to attract LG users,” said Ko I- young, an analyst at Hi Investment & Securities.

LG’s smartphone division recorded nearly six years of losses, totaling about $ 4.5 billion. Leaving the highly competitive sector would allow LG to focus on areas of growth, such as electric vehicle components, connected devices and smart homes, the company said in a statement.

In better times, LG came to the market early with a series of innovations in cell phones, including ultra-wide-angle cameras and, at its peak in 2013, it was the third largest smartphone manufacturer in the world, behind only Samsung and Apple .

Later, however, its main models suffered from software and hardware problems that, combined with slower software updates, caused the brand to continually fall in favor. Analysts have also criticized the company for lack of marketing expertise compared to Chinese rivals.

Although other well-known cellphone brands, such as Nokia, HTC and Blackberry have also fallen from high heights, they have not yet completely disappeared.

LG’s current global share is just 2%. It sold 23 million phones last year, compared to Samsung’s 256 million, according to research provider Counterpoint.

In addition to North America, it has a considerable presence in Latin America, where it is classified as the No. 5 brand.

Although rival Chinese brands such as Oppo, Vivo and Xiaomi do not have much of a presence in the United States, partly due to icy bilateral relations, their low to medium range and Samsung product offerings are expected to benefit from LG’s absence in Latin America , analysts said.

LG’s smartphone division, the smallest of its five divisions accounting for about 7% of revenue, is expected to close on July 31.

In South Korea, division employees will be transferred to other LG Electronics companies and affiliates, while employment decisions will be made at the local level elsewhere.

Analysts said they were told in a conference call that LG plans to retain its 4G and 5G core technology patents, as well as key R&D personnel, and will continue to develop communications technologies for 6G. It has not yet decided whether to license such intellectual property in the future, they added.

LG will provide service support and software updates to customers of existing mobile products for a period that varies by region, he added.

Negotiations to sell part of the deal to Vietnam’s Vingroup failed due to differences in terms, sources with knowledge of the matter said.

LG Elec’s shares have risen about 7% since the January announcement that it was considering all options for the business.