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LG Electronics confirmed on Monday, April 5, that it has given up on its smartphone business. The company made the decision to close its phone manufacturing division after suffering from years of losses.
LG shuts down its phone manufacturing unit
LG Electronics already announced earlier this year that it has plans to shut down its mobile phone unit, but at that time, nothing was certain yet. As per Reuters, it still tried to find other solutions, including selling the division, but negotiations have failed.
In particular, it was mentioned that Vietnam’s Vingroup was on the negotiating table with LG for possible acquisition, but the companies failed to agree on terms. Thus, in the end, the deal fell apart. The only option left for the South Korean electronics company is to fold the business.
LG Electronics could no longer save this unit as it already recorded a loss of $4.5 billion in the last six years. There is no clear sign of recovery, so rather than incurring further losses, the company just withdrew from the phone market.
With its departure, it will be saving money since there will be fewer expenses now that one of its divisions has closed. So, what will LG do with the savings?
LG’s new plans as a replacement to the mobile biz
LG Electronics will fully stop the operations of its smartphone line on July 31. This is to give time for the previous orders and deals to be completed.
Now, the company is planning to focus on mobility after the closure. It will not get rid of the innovations and technologies that were created for smartphones, but they will be applied for other purposes.
The Korea Times reported that the firm will reallocate resources to other promising areas including electric vehicle components, appliances, robotics, connected devices and artificial intelligence (AI). Although LG will work on these things, it was said that it will focus more on EV components since it is the most in-demand right now.
"LG Electronics has not been able to produce meaningful results due to its insufficient response time when the premium smartphone market is dominated by two companies and the price competition in the budget smartphone market has intensified," LG said in a statement. "Under these circumstances, LG will focus its capabilities on core business that can streamline internal resources and secure competitive advantages through a choice and concentration strategy.”
