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South Korea's LG becomes first major smartphone brand to withdraw from market

Stock MarketsApr 05, 2021 04:21AM ET
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2/2 © Reuters. FILE PHOTO: A man talking on his phone walks past the logo of LG Electronics during Korea Electronics Show 2016 in Seoul 2/2

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) - South Korea's LG Electronics Inc will wind down its loss-making mobile division after failing to find a buyer, a move that is set to make it the first major smartphone brand to completely withdraw from the market.

Its decision to pull out will leave its 10% share in North America, where it is the No. 3 brand, to be gobbled up by Samsung Electronics (OTC:SSNLF) and Apple Inc (NASDAQ:AAPL) with its domestic rival expected to have the edge.

"In the United States, LG has targeted mid-priced - if not ultra-low - models and that means Samsung (KS:005930), 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.

LG's smartphone division has logged nearly six years of losses totalling some $4.5 billion. 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.

In better times, LG was early to market with a number of cell phone innovations including ultra-wide angle cameras and at its peak in 2013, it was the world's third-largest smartphone manufacturer behind Samsung and Apple.

But later, its flagship models suffered from both software and hardware mishaps which combined with slower software updates saw the brand steadily slip in favour. Analysts have also criticised the company for lack of expertise in marketing compared to Chinese rivals.

While other well-known mobile brands such as Nokia (NYSE:NOK), HTC and Blackberry (TSX:BB) have also fallen from lofty heights, they have yet to disappear completely.

LG's current global share is only about 2%. It shipped 23 million phones last year which compares with 256 million for Samsung, according to research provider Counterpoint.

In addition to North America, it does have a sizeable presence in Latin America, where it ranks as the No. 5 brand.

While rival Chinese brands such as Oppo, Vivo and Xiaomi (OTC:XIACF) do not have much of a presence in the United States, in part due to frosty bilateral relations, their and Samsung's low to mid-range product offerings are set to benefit from LG's absence in Latin America, analysts said.

LG's smartphone division, the smallest of its five divisions accounting for about 7% 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.

Analysts said they were told in a conference call that LG plans to retain its 4G and 5G core technology patents as well as core R&D personnel, and will continue to develop communication technologies for 6G. It has yet to decide whether to license out such intellectual property in the future, they added.

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.

Talks to sell part of the business to Vietnam's Vingroup fell through due to differences about terms, sources with knowledge of the matter have said.

LG Elec shares have risen about 7% since a January announcement that it was considering all options for the business.

South Korea's LG becomes first major smartphone brand to withdraw from market
 

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Comments (11)
Hunt Richardson
Hunt Richardson Apr 05, 2021 7:35AM ET
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My first two phones were LG flip phones. they were indestructible until a car ran over one of them. Great sound strong connections. LG never made a monster phone that could compete with Samsung and Apple's best. they could have used one as a flagship
Costar Kingsley Mokwena
Costar Kingsley Mokwena Apr 05, 2021 7:26AM ET
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If Nokia, HTC, LG , blackberry merge , and produce a mobile smart device and Call it MarsCheap things dont work Sell it at $500It will defeat Apple
Arsene Lar
Arsene Lar Apr 05, 2021 2:53AM ET
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LG just like blackberry just missed the biggest opportunity. And it is so simple to do. Just do something that nobody else is doing but everybody wants. An anonymous phone.
Joel Schwartz
Joel Schwartz Apr 05, 2021 2:53AM ET
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LG was my first flip-phone. Thing was rad. 1.3MP camera, hehe
Robert Flores
Robert Flores Apr 05, 2021 12:50AM ET
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LG will be a great buy the dip
Jay Jung
Jay Jung Apr 05, 2021 12:45AM ET
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The evil Xijinping,  don't visit Korea, otherwise you will die in Korea. Nobody likes the virus creator.
David David
David9 Apr 05, 2021 12:45AM ET
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Who don't like? Give us name...
yeeun kang
yeeun kang Apr 05, 2021 12:45AM ET
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china is virus creator
yeeun kang
yeeun kang Apr 05, 2021 12:45AM ET
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besides, xijinping is the Chinese president
David David
David9 Apr 05, 2021 12:24AM ET
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Huawei was the best and sold the most phones until the US cheated. But eventually Huawei will break out and become the number 1 again... you can slow them down with tricks but you can never keep a winner down for long...
Notvery Goodathis
Peteymcletey Apr 04, 2021 11:52PM ET
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Bad for the consumer
Pablo Blanc
Pablo Blanc Apr 04, 2021 11:19PM ET
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Nok.
Mike Lomash
Mike Lomash Apr 04, 2021 10:39PM ET
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Bringing NASDAQ down with it?
Josh Moore
Josh Moore Apr 04, 2021 10:39PM ET
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They’re not in the nasdaq. Id guess this is good for american mobile companies.
Kevin Tortoise
Kevin Tortoise Apr 04, 2021 10:24PM ET
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Good riddance
 
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