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LG Electronics to exit from loss-making smartphone business
2021/04/06 03:31:54

Apr 06, 2021 (China Knowledge) - South Korea's LG Electronics has said in a regulatory filing that it will end its loss-making smartphone business amid intensifying competition in the industry.

Once the third-largest handset maker, the company will no longer produce and sell handsets after July 31 with focus expected to shift to the more profitable home appliance and TV divisions. LG said it will finish the existing orders and promised to provide sufficient after-sales services to its phone owners even after leaving the mobile business.

The company's mobile business has been in the red for 23 consecutive quarters since the Q2, 2015, with accumulated operating losses in 2020 standing at KRW 5 trln. (USD 4.4 bln)

In an effort to reverse this trend and boost its premium smartphone sales, LG launched a dual-screen smartphone with a rotating form factor last year, but the sales were apparently disappointing.

Data from Counterpoint Research shows that the company was overshadowed by Samsung Electronics and Apple in the premium segment, and surpassed by Chinese brands such as Xiaomi, Oppo and Vivo in the budget phone sector. As of the Q3, 2020, the global market share of LG's mobile business was just about 2%, ranking ninth compared to its global rivals.

Analysts had been expecting LG's decision to withdraw from the mobile business after the company's talks with potential buyers such as Vingroup in Vietnam and Volkswagen in Germany fell through.

LG’s exit from the mobile business will help improve its business portfolio and financial structure in the mid and long-term, with its operating profit expected to go up by KRW 1 trln (USD 886.8 mln) this year.

Investors seemed to welcome the decision, as shares in LG Electronics jumped over 2% in morning trading on Monday.

LG will continue its R&D activities in mobile technologies, especially focusing on securing 6G telecommunications solutions, which are essential resources for developing next-generation TVs, home appliances, vehicle components and robots.

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