LG Electronics is shutting down its loss-making smartphone business, the company stated on Monday. This will make LG the first major smartphone brand to completely withdraw from the market.
The decision will also mean that Apple and Samsung Electronics will gobble up LG's 10 per cent market share in North America, where it is the No. 3 brand. "The division has logged nearly six years of losses totalling some $4.5 billion (roughly Rs 33,010 crore), and dropping out of the fiercely competitive sector would allow LG to focus on growth areas such as electric vehicle components, connected devices and smart homes," it said in a statement.
LG had made many innovations including ultra-wide angle cameras, rising to third largest smartphone maker in 2013. While Apple and Samsung rose to become the industry toppers, LG suffered from its own hardware and software issues. The company said the mobile phone market had become "incredibly competitive".
As LG struggled with losses it had held talks to sell part of the business but these fell through.
Last year it shipped 28 million phones, which compares with 256 million for Samsung, according to research firm Counterpoint. The smartphone business is the smallest of LG's five divisions, accounting for just 7.4 per cent of revenue. Currently its global mobile phone market share is about 2 per cent.
In addition to North America, it does have a sizeable presence in Latin America, where it ranks as the No. 5 brand. LG phones are still fairly common in its domestic South Korean market. However,
analysts have criticised the company for lack of expertise in marketing compared to Chinese rivals.
LG's smartphone division—the smallest of its five divisions, accounting for about 7 per cent of revenue—is expected to be wound down by July 31.
In South Korea, the division's employees will be moved to other LG Electronics businesses and affiliates while elsewhere decisions on employment will be made at the local level.
LG will provide service support and software updates for customers of existing mobile products for a period of time which will vary by region, it added.