LG Electronics announces decision to close its mobile business

LG Electronics said earlier this year that it has plans to stop producing and selling smartphones. At that time, the company stated it is considering all options for its mobile business because it is not making money anymore.

LG Electronics explained that it started to mull about closing its smartphone-making division as the company has been losing money for almost six years. It was said that losses have already reached a staggering $4.5 billion.

The first major brand to exit

With its final decision, Reuters reported that LG Electronics has become the first major mobile brand to totally withdraw from the market. One of the reasons why it has come to this was the company’s failed sale negotiation with Vietnam’s Vingroup. The acquisition talks fell apart because the two parties can’t reach an agreement with the terms.

LG’s exit is sort of a surprise since the company has always been the first to market smartphones with innovative features and cutting-edge functions like ultra-wide-angle mobile cameras. With its extraordinary products, the electronics company became one of the world’s largest mobile phone-maker in 2013, competing with Apple and Samsung.

However, the firm later encountered software and hardware issues with its flagship models. This made the phones slower and people slowly shifted to faster brand units.

Eventually, LG started to lose customers and has been in the red since 2015. The sales decline continues up to this day and in fact, research shows that it only shipped around 23 million units in 2020 compared to Samsung’s shipment of 256 million units.

What will happen with LG’s withdrawal in phone biz?

Then again, despite the end of LG Electronic’s production of smartphones, it will still keep its mobile technology and apply these to its home appliances business instead. The company will also use these technologies to produce some parts for electric cars.

"Our core mobile technologies in 6G telecommunications, cameras and software are essential resources for developing next-generation TVs, home appliances, vehicle components and robots, so its R&D will continue under the guidance of our chief technology officer," the company stated.

As per Yonhap News Agency, based on the company’s regulatory filing, LG will stop the manufacturing and selling of mobile phones after July 31. With its exit, the company’s revenue will go down but this will be for short term only.

LG Electronics is expecting a big improvement in its financial status since it will stop shelling out money for its smartphone biz. Analysts think that its revenues may increase up to KRW1 trillion since it doesn’t have to spend on a money-losing mobile business anymore.