Focus on EV, Smart Homes, and Connected Devices
In what marks to be the first major tech company to have completely exited the smartphone arena, LG Electronics announced on Monday plans to shut down its smartphone-making business division by July 31. Instead, the tech company will focus on areas such as building electric vehicle (EV) components, connected devices, and smart homes.
This news doesn’t come as a major surprise for tech business investors as the company’s smartphone unit amassed about $4.5 billion in losses over the past six years. The smartphone business unit is the smallest of five divisions and currently accounts for about 7% of annual business revenue.
It is estimated that the tech company has a market share of around 10% in North America and 2% globally. The company sold 23 million units last year, which is less than a tenth of the 256 million units sold by Samsung and around 230 million shipped by Apple.
The smartphone market is known to be one of the most competitive tech sectors in the world, dominated by Apple’s iPhone lineup and Samsung. The decision is likely to have a major impact in North America as LG is the third biggest smartphone company in this region, behind Samsung and Apple.
“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,” said Ko Eui-young, an analyst at Hi Investment & Securities.
The company’s market share has fallen dramatically in the past few years as it couldn’t cope with a surge in the number of emerging smartphone-makers, mostly from China. In 2013, LG was the world’s third-biggest smartphone manufacturer behind Samsung and Apple. The industry experts criticized the company for its lack of marketing expertise and poor quality of its models.
In addition, in North America, LG has a significant presence in the Latin America region. Other major tech businesses, led by Samsung, are expected to benefit the most from LG’s exit from the smartphone market.
“In South America, Samsung and Chinese companies such as Oppo, Vivo and Xiaomi are expected to benefit in the low to mid-end segment,” said Park Sung-soon, an analyst at Cape Investment & Securities.
LG said that its employees affected by this decision will be mostly transferred to other business units of LG Electronics. The company will continue to offer service support and software updates for customers of existing mobile products.
In separate news, LG’s rival Samsung Electronics is likely to report a profit surge by 45% for Q1, according to a Reuters report. The company’s smartphone business unit performed immensely once again to increase its market share to 23% from 16% in the prior quarter when Apple released its iPhone 12 lineup.
Surveyed analysts are expecting the South Korean tech company to report an operating profit of ₩9.3 trillion ($8.2 billion) for the business quarter through March. Samsung is due to report its official quarterly earnings this Wednesday.
LG Electronics said today it will close down its smartphone business division by July 31 after it has recorded nearly six years of losses totaling about $4.5 billion. This decision is likely to play in the hands of Samsung and Apple, as LG has a 10% market share in North America.
About the Author
Avi Ben Ezra is the CTO and Co-founder of SnatchBot and SnatchApp (Snatch Group Limited). He leads the Group’s long-term technology vision and is responsible for running all facets of the tech business which includes being the architect of the platforms and UI interfaces.