South Korean company LG Electronics will close its loss-making smartphone business after years of struggling to compete with rivals ranging from Apple to low-cost Chinese upstarts.
The Seoul-based group said on Monday it would officially leave the industry and instead focus on growth areas such as vehicle components.
LG has lost ground in smartphones as the global market has become more saturated. It also faced pressure from cheaper Chinese competitors in the low-mid segment while being foiled by Apple and its local rival Samsung Electronics in the high end of the market.
The company’s mobile phone business has recorded cumulative losses of nearly $ 4.5 billion over the past five years, with its global market share falling to around 2%, according to research provider Counterpoint. The company reported Won5.2tn ($ 4.6 billion) in sales last year, or 8.2% of LG’s total revenue.
“We will end production and sales of the mobile phone business due to its continued collapse amid stiffer competition,” the company said in a regulatory filing. “We will improve our business portfolio by effectively focusing our resources on key areas.”
The company added that its withdrawal from smartphones would improve its competitiveness and financial position in the long run, although the move could hurt sales in the short term.
LG was a major player in the global mobile phone market before the emergence of feature-packed smartphones, where it was a latecomer.
Investors had asked the company to shut down the smartphone business, arguing it represented a misallocation of resources weighing on LG’s market valuation, despite strong sales of high-end home appliances and televisions.
“It’s always better to be late than never,” said Daniel Kim, analyst at Macquarie, of LG’s decision to exit the industry. “He entered the smartphone market too late and was unable to evolve in the face of fierce competition in a saturated market.
LG’s fortunes in the smartphone market stand in stark contrast to Korean opponent Samsung, which has achieved pole position globally. LG shipped 23 million phones last year, compared to Samsung’s 256 million, according to Counterpoint.
LG has abandoned the world’s top seven players in terms of market share, as successive failures of its flagship smartphones have cost it ground against fast-growing Chinese groups such as Huawei, Xiaomi and Oppo.
But it remained the third-largest smartphone maker in North America and the fifth-largest player in Latin America in terms of market share.
The company is expected to re-direct its resources further to the rapidly growing electric vehicle components industry, leveraging its links with affiliates including battery leader LG Energy Solution, screen maker LG Display, and battery module supplier. LG Innotek camera. The company plans to launch a joint venture with automotive supplier Magna International in July to manufacture components for electric vehicles.
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