LG Electronics exits from mobile business; How it lost the race in smartphone market

New Delhi: The South Korean tech powerhouse 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 company 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 Electronics that was once the world's third-largest handset maker and saw its feature phone business peaked some 10 years back, was never a serious contender in the fastest-growing India market.

The company'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 and had only 0.15 per cent market share in 2019 and 0.30 per cent in 2020.

According to industry insiders, the South Korean tech giant reportedly had talks with Vingroup of Vietnam and Volkswagen of Germany to sell the mobile business, but the talks fell through.

LG has been striving to make a turnaround in its mobile business in recent years by shifting its smartphone production base to Vietnam while expanding outsourcing deals. To boost its premium smartphone sales, LG last year had launched the Explorer Project, its new mobile category highlighted by a different form factor.

Under its revival project, the company also released the niche foldable smartphone called 'Wing, a dual-screen smartphone with a rotating form factor, but its sales were apparently disappointing.

Analysts said LG's efforts were not enough to turn the table as the company was overshadowed by Samsung Electronics Co. and Apple Inc. in the premium segment, while Chinese brands dominated the budget phone sector.

"Its strategic smartphone models like the Velvet and the Wing performed poorly and with the 5G momentum passing its peak, the company has lost ground in the premium smartphone market with little cards left to play," said Koh Jung-woo, an analyst at NH Investment & Securities.

LG was sandwiched between competitive entry to mid-tier offerings from Chinese brands on the one hand and Apple, Samsung, OnePlus in the premium segment on the other in the fierce India market.

In addition, The company has lacked the stable chip supplies for its smartphone business.

This year, LG was scheduled to launch a smartphone with a rollable OLED display after it teased the product at the Consumer Electronics Show (CES) 2021. However, the company scrapped the plan.

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.

Analysts said that LG's operating profit could go up by 1 trillion South Korean won this year if it withdraws from the loss-making mobile business.

According to market researcher Counterpoint Research, LG was the world's ninth-largest smartphone vendor with a market share of 2 percent after shipping 24.7 million smartphones last year, down 13 percent from a year earlier.

Industry experts says that from a strategic perspective, LG is positioned for long-term success in its core business areas, including consumer electronics, as well as in moonshots, such as affordable EVs, and in emerging opportunities in connected homes.

(With inputs from IANS)