Daily Management Review

Continued Losses Force South Korea's LG To Become The First Smartphone Major To Leave Of Market


Continued Losses Force South Korea's LG To Become The First Smartphone Major To Leave Of Market
South Korea's LG Electronics Inc will be the first major smartphone maker of the world to completely move away from the market as the company announced its decision to completely wind down its loss making mobile division after the company failed to get a buyer for the division.
In North America, the LG is the third largest brand with a market share of 10 per cent that and this decision of the company to pull out of the business will leave that market share to be fought out for domination between Samsung Electronics and Apple Inc and in which the domestic rival Apple is expected to have the edge.
"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 said in a statement that its smartphone division has been making losses continuously for six years now and the accumulated loss is about $4.5 billion. With its decision to move away from a market that is fiercely competitive, LG will now be able to focus on growth in some of the more profitable businesses including making of electric vehicle components, connected devices and smart homes, it added in the statement.
LG is known to be an innovator in smartphone with the company being the early mover to introduce ultra-wide angle cameras. It was the third largest smartphone maker – preceded by Samsung and Apple, at its peak in 2013.
However, software and hardware mishaps for the flagship models of the company, combined with slower updates for its smartphones resulted in the steady demise of the brand over the last seven years. The company has also been criticised of lacking in advertisement and marketing expertise in comparison to its Chinese rivals, according to analysts.
Even though other one time market leaders in the mobile industry including brands such as Nokia, HTC and Blackberry, have seen a fall in their fortunes, none are yet completely out of the market and their phones can be seem still now.
Currently, the LG had a global market share of only 2 per cent of the smartphone market as it shipped 23 million phones last year. In Comparison in the same period, Samsung shipped 256 million devices, according to research provider Counterpoint.
In addition to North America, it does have a sizeable presence in Latin America, where it is ranked as the No. 5 brand.
According to analysts, while there is not much of a presence in the United States of LG’s rival Chinese brands such as Oppo, Vivo and Xiaomi primarily because of the tensions between the two countries, the low to mid-range product offerings of the Chinese companies and those from LG’s South Korean rival Samsung are set to challenge other brands in taking up the space left by LG in Latin America, said analysts.