With this decision, the company will leave a 10% market share in North America, where it is the number 3 brand, to be swallowed by Samsung and Apple (with an advantage for its fellow countryman).
“In the United States, LG is targeting mid-priced models – if not ultra-low – and that means that Samsung, 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 recorded nearly six years of losses, totaling about $ 4.5 billion. Leaving the highly competitive sector will allow LG to focus on areas of growth, such as electric vehicle components, connected devices and smart homes, the company said in a statement.
In better times, LG brought to the market a series of innovations for cell phones, including ultra-wide-angle cameras and at its peak in 2013, it was the third largest smartphone manufacturer in the world, behind Samsung and Apple.
Later, however, its main models suffered from software and hardware problems that, combined with slower updates, caused the brand to drop continuously. Analysts have also criticized the company for lack of marketing expertise compared to Chinese rivals.
Although other well-known cellphone brands, such as Nokia, HTC and Blackberry have also fallen from heights, they have not yet completely disappeared.
LG’s current global share is just 2%. It sold 23 million phones last year, compared to Samsung’s 256 million, according to research provider Counterpoint.
In addition to North America, it has a considerable presence in Latin America, where it is classified as the No. 5 brand.
Although rival Chinese brands such as Oppo, Vivo and Xiaomi do not have much presence in the United States, partly due to icy bilateral relations, their low to medium range and Samsung product offerings are expected to benefit from LG’s absence in Latin America, analysts said.
LG’s smartphone division, the smallest of its five divisions and responsible for about 7% of revenue, is expected to close on July 31.
In South Korea, the division’s employees will be transferred to other LG Electronics companies and affiliates, while elsewhere employment decisions 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 technology patents, as well as research and development personnel, and will continue to develop communications technologies for 6G. It has not yet decided whether to license such intellectual property in the future, they added.
LG will provide service support and software updates to customers of existing mobile products for a period of time that varies by region, he added.
Negotiations to sell part of the deal to Vietnam’s Vingroup have failed due to differences in terms, sources with knowledge of the matter said.
LG Elec’s shares have risen about 7% since the January announcement that it was considering all options for the business.
Here, the company has a cell phone factory in Taubaté that employs around 400 people. Questioned, the local operation sent the following note, which indicates changes in the plant:
“After evaluating all the possibilities for the future of our cell phone business, Headquarter Global decided to close this division in order to strengthen its future competitiveness through selection and strategic focus.
As a company that deeply values the contribution of every LG employee, customer and partner, we will communicate openly and transparently during this process, seeking a fair and pragmatic approach, while meeting legal obligations.
It is with sadness that we share this news with our customers and partners who throughout all these years have shown us confidence and supported us.
LG Electronics do Brasil thanks you and will focus heavily on your business in order to continue to provide innovative products and services that will make life better. ”
The company’s other factory, in Manaus, should not suffer from changes.
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