LG Electronics announced that it is closing its mobile phone business unit enabling the South Korean company to focus on growth areas such as electric vehicle components, connected devices, smart homes, robotics, artificial intelligence and business-to-business solutions.
LG’s mobile business has been in the red since the second quarter of 2015. Its accumulated operating losses reached 5 trillion won (US$4.4 billion) last year.
LG Electronics did not reveal the number of jobs being affected due to the shutting down of its phone business.
LG, once the world’s third-largest handset maker, had held talks with Vingroup of Vietnam and Volkswagen of Germany to sell the mobile business, but the talks fell through, Yonhap news agency reported.
LG said its exit from the mobile business will lead to a decline in revenue for the company in the short term but will eventually improve its financial status and management efficiency in the longer period.
Analysts said that LG’s operating profit could go up by 1 trillion won this year if it withdraws from the loss-making mobile business.
LG has been striving to make a turnaround in its mobile business in recent years, shifting its smartphone production base to Vietnam while expanding outsourcing deals.
LG last year launched the Explorer Project to boost its premium smartphone sales. Under the project, the company released the Wing, a dual-screen smartphone with a rotating form factor, but its sales were apparently disappointing.
This year, LG was scheduled to launch a smartphone with a rollable OLED display after it teased the product at the Consumer Electronics Show (CES) 2021. However, the company reportedly scrapped the plan.
Analysts said LG’s efforts were not enough to turn the table as the company was overshadowed by Samsung Electronics and Apple in the premium segment, while Chinese brands dominated the budget phone sector.
“Its strategic smartphone models like the Velvet and the Wing performed poorly and with the 5G momentum passing its peak, the company has lost ground in the premium smartphone market with little cards left to play,” said Koh Jung-woo, analyst at NH Investment & Securities.
According to market researcher Counterpoint Research, LG was the world’s ninth-largest smartphone vendor with a market share of 2 percent after shipping 24.7 million smartphones last year, down 13 percent from a year earlier.
Action plan
LG will provide service support and software updates for customers of existing mobile products for a period of time which will vary by region. LG will work with suppliers and business partners throughout the closure of the mobile phone business.
LG will develop mobility-related technologies such as 6G to help further strengthen competitiveness in other business areas. Core technologies developed during the two decades of LG’s mobile business operations will be retained and applied to existing and future products.
The wind down of the mobile phone business is expected to be completed by July 31 though inventory of some existing models may still be available after that.