Gu Gwang-mo’s decision to grow only the business that will become

LG Electronics held a board meeting on the 5th and decided to withdraw from the smartphone business (MC Business Division). It has been 75 days since President Kwon Bong-seok announced a business review on January 20th. Meanwhile, negotiations have been made to sell the smartphone business to Vingroup in Vietnam, Volkswagen in Germany, and Google in the United States, but all of them are said to have failed.

LG phones were first introduced in 1995 as a phone developed by LG Information and Communication. LG Information & Communication merged with LG Electronics in 2000. For the next 10 years, LG Electronics and Samsung Electronics competed fiercely with Samsung Electronics for share of the global mobile phone market. Chocolate phones in 2005 and Prada phones in 2007 were very popular with consumers at the time. LG Electronics sold 28 million units in the third quarter of 2010, ranking third in the global mobile phone market.

But that was it. Since Apple released the iPhone in 2007, the smartphone craze has risen, but LG Electronics’ response has been modest. Since LG Electronics released its first smartphone, Optimus in 2010, it has introduced the G and V series, Velvet, and Wing, but did not produce any clear results. An industry official who wanted anonymity pointed out, “It was a’handshake’ that the management of LG Electronics, who did not forget the glory of the feature phone, focused on marketing, not technology.

As the smartphone business was sluggish in the 2010s, LG’s concerns deepened. The smartphone business has recorded an operating deficit for 23 consecutive quarters since the second quarter of 2015. The cumulative deficit was around 5 trillion won. However, LG Electronics could not easily close the smartphone business. This is because smartphones act as a hub for electric vehicles and future mobility (means of transportation), including home appliances. It is reported from inside and outside the company that the decision of LG Chairman Kwang-mo Koo played an important role in this decision. Since taking office in 2018, Chairman Koo has emphasized choice and focus.

Indeed, Chairman Koo declared a drastic withdrawal of deficit businesses such as fuel cells, liquid crystal displays (LCDs), and electronic payments. Chairman Koo is said to have had long discussions with LG Electronics management, including President Kwon. A senior LG Electronics official said, “As a result of reviewing all possibilities, we decided that ending the business would be a strategic advantage from a mid- to long-term perspective.”

In the future, LG Electronics plans to focus on new businesses in the future, such as automotive electronics, artificial intelligence (AI) and robots. The company’s 24,000 patents in the field of smartphones and mobile communications are linked to new businesses. With LG Electronics’ decision to withdraw its smartphone, the rollable phone that the industry paid attention to was no longer visible. Rollable Phone released a teaser video for about 5 seconds at’CES 2021′, a consumer electronics exhibition in the United States in January. It was evaluated as being superior to a foldable phone that folds the screen. LG Electronics plans to link the rollable technology to new business in the future. LG Electronics said, “Even if the smartphone business is terminated, the research and development of core mobile technologies such as 6G (6G) mobile communications, cameras, and software will continue.”

Now, only Samsung Electronics remains in the global smartphone market. Samsung Electronics is also on the test bench. It is still the number one in the world, but the 20% market share, which has been kept for 10 years, collapsed last year. According to market research firm Strategy Analytics (SA), last year, Samsung Electronics’ smartphone market share was 19.5%. Apple (15.5%) and Huawei (14.4%) are following that.

An industry official who wanted to remain anonymous said, “As LG Electronics, the only competitor (domestic), withdrew, it is a bad thing for Samsung Electronics, which is the’one-top’. I can,” he said.

LG phone vacant position, Samsung ‘70,000 won compensation’ Xiaomi is’free phone’

Competitors’ steps to occupy the vacant position of LG Electronics will also accelerate. According to Stat Counter, a market research firm, the global market share of LG smartphones as of last month was only 1.63%. However, in Korea, LG Electronics occupies 6.4% of the market following Samsung Electronics (64.6%) and Apple (25.6%).

Samsung Electronics has been giving more than 70,000 won to consumers who return LG Electronics’ V50 and switch to the Galaxy S series since the 1st. Apple cuts iPhone repair costs and insurance premiums by 10%. In February, Apple opened the second Apple store in Korea in Yeouido, Seoul, and is actively beckoning to consumers. Xiaomi has significantly expanded the public announcement support for the 5th generation (5G) mobile communication phone, Mi 10 Lite, which was launched last month. In fact, it is being sold as a’free phone’. In the industry, considering that LG Electronics’ smartphones have used the Android operating system (OS), Samsung Electronics and Xiaomi can benefit.

LG Electronics is planning to distribute all the manpower (about 3700 people) of the MC business division to other departments or affiliates such as LG Magna and LG Energy Solutions. It is said that the after-sale service (AS) for LG phone consumers is provided without any inconvenience. In the industry, it is common to maintain a smartphone OS upgrade for 2 years after launch and maintenance for a terminal for about 4 years.

Kim Dong-won, a researcher at KB Securities, said, “(LG Electronics’ withdrawal of smartphones) will serve as an opportunity to resolve uncertainties in the future.”

On the 5th, in the KOSPI market, LG Electronics’ stock price ended at 154,500 won, down 2.54% from the previous day.

Reporters Choi Hyun-joo and Kim Kyung-jin [email protected]