LG Phone Into History in 26 Years… “Clear benefits from a mid- to long-term perspective”

LG Electronics’ smartphone is completely withdrawn from the market. It has been 26 years since mobile phones were first introduced under the’Hwatong’ brand in 1995. In the mid-2000s, it showed momentum enough to rank third in the world with feature phones such as’Chocolate’ and’Shine’, but it was a big blow to miss the trend of smartphone change.

LG Electronics held a board meeting on the 5th and announced the suspension of business that the MC division, in charge of the smartphone business, will end production and sales on July 31st. It has been 75 days since LG Electronics President Kwon Bong-seok announced a’business review’ to in-house employees on January 20th. It has been negotiated with Vietnam’s Vingroup, Germany’s Volkswagen, and the United States’ Google, but all of them are known to have failed.

LG phone debuted with the’Channel Tong’ developed by LG Information and Communication in 1995. After LG Information & Communication merged with LG Electronics in 2000, it was called as a leader in the global market with Samsung Electronics for nearly 10 years. ‘Chocolate Phone’ in 2005 and’Prada Phone’ in 2007 were very popular. In the third quarter of 2010 alone, over 28 million units were sold, ranking third in the world.

But that was it. When Apple launched the iPhone in 2007, it led the’smart phone craze’, but the delay in rapid response to this was fatal. LG released its first smartphone,’Optimus,’ only in 2010. Afterwards, it showed off the’G’ and’V’ series,’Velvet’, and’Wing’, but it did not produce any clear results. An industry official who wanted anonymity pointed out, “It became a’handshake’ that LG Electronics’ management, who had not forgotten the glory of the feature phone, focused on marketing rather than technology.”

LG’s worries deepened. Since the second quarter of 2015, it has recorded a cumulative operating loss of 5 trillion won for 23 consecutive quarters, but it has not been able to close the smartphone business easily. This is because smartphones serve as a hub for electric vehicles and IT mobility, including home appliances. It is known that the decision of LG Chairman Kwang-mo Koo played a large role in the decision to withdraw. After taking office in 2018, Chairman Koo has emphasized’choice and concentration’.

Indeed, Chairman Koo boldly declared withdrawal from deficit businesses such as fuel cells, liquid crystal displays (LCDs), and electronic payments. Even at the time of the inauguration of Chairman Koo, the cumulative operating deficit of smartphones exceeded 2.8 trillion won. It is reported that he eventually decided to end the business after long discussions with LG Electronics executives such as Kwon Bong-seok. A senior official of the company said, “After examining all the possibilities, we decided that closing the business was a clear 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 holds more than 24,000 patents in the field of smartphones and mobile communications, and the rollable technology that was noticed in’Consumer Electronics (CES) 2021′ in January will be linked with new types of business. 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.” This is because it is a technology required for next-generation TVs, home appliances, electronic parts, and robots.

As a result, only Samsung Electronics remains in the global smartphone market. Pantech, which once formed the top three in Korea, was sold in 2015. Samsung Electronics is also on the test bench. Although it is still the number one in the world, the ‘20% market share’, which has been kept for 10 years, collapsed last year. According to market research firm Strategy Analytics (SA), Samsung Electronics’ smartphone share last year was 19.5%, which is closely followed by Apple (15.5%) and Huawei (14.4%).

Another industry official who wanted to remain anonymous said, “As the only competitor, LG Electronics, withdraws, it may cause a disruption in the supply of human resources, R&D, and parts, and the’Korean phone ecosystem’ may be shaken. I was concerned.

Meanwhile, competitors’ steps to occupy LG Electronics”vacancy’ are also accelerating. According to Stat Counter, the global market share of LG smartphones as of last month was only 1.63%. However, in Korea, it accounts for 6.4% after Samsung Electronics (64.6%) and Apple (25.6%).

From the 1st of this month, Samsung Electronics has returned LG Electronics’ V50 and is giving 70,000 won of’Ultra Money’ to consumers who switch to the Galaxy S series. Apple cuts iPhone repair costs and insurance premiums by 10%. In February, after opening Garosu-gil in Yeouido, Seoul, the second largest store in Korea, the Apple Store, was actively pursued. Xiaomi is selling it as a’free phone’ by significantly expanding the public announcement subsidies for the’Mi 10 Lite’, a mid-range 5G phone launched last month.

In the industry, LG Electronics has been strong in mid- to low-end phones, and since Android has the same operating system (OS), it is predicted that Samsung Electronics and Xiaomi will be the major beneficiaries. Some predict that Apple, which has expanded its fan base after the iPhone 12 launch, will be tough.

LG Electronics plans to distribute all 3,700 personnel belonging to the MC business headquarters to other departments or to newly launched affiliates such as LG Magna and LG Energy Solutions. It is said that the after-sale service (AS) for LG phones is provided without any inconvenience. In general, the smartphone AS is maintained for 2 years after release in case of OS upgrade and 4 years for terminal maintenance.

Kim Dong-won, an analyst at KB Securities, said, “(Withdrawal from the smartphone business) will serve as an opportunity to resolve uncertainties in the future.” .

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