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LG to close smartphone business, withdraw from market

LG Electronics, South Korea’s second-largest appliance firm after Samsung, is closing down its loss-making mobile phone business, after failing to find a buyer, a move that is set to make it the first major smartphone brand to completely withdraw from the market.

The firm was once considered a pioneer of the Android operating system, collaborating with Google on the Nexus series in the early 2010s.

At its peak in 2013, LG was the world’s third-largest smartphone manufacturer behind Samsung and Apple.

But it has long struggled to increase sales, entering the market late and facing tough competition from emerging cheaper Chinese rivals such as Huawei.

It was regularly listed among the world’s top 10 smartphone manufacturers but according to tracker Counterpoint, the last time it recorded a global market share of three per cent or more was in the second quarter of 2018.

Last year, it shipped 23 million phones against Samsung’s 256 million, according to Counterpoint.

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The unit has recorded losses for 23 consecutive quarters since 2015, with the cumulative deficit reaching about 5 trillion won ($4.4 billion) by the end of last year.

The division has “failed to produce results” amid “intensifying price competition among major competitors in the entry-level mobile phone market”, the company said in a statement.

Dropping out of the fiercely competitive sector would allow LG to “focus resources in growth areas such as electric vehicle components”, robotics and smart homes, it added.

LG’s smartphone division, the smallest of its five divisions accounting for about seven per cent of revenue, is expected to be wound down by July 31.

While other well-known mobile brands such as Nokia, HTC and Blackberry have also fallen from lofty heights, they have yet to disappear completely.

LG reportedly held talks with Vietnam’s Vingroup over a potential sale, but it broke down over price differences, according to local reports.

In South Korea, the division’s employees will be moved to other LG Electronics businesses and affiliates, while elsewhere decisions on employment will be made at the local level.

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Analysts said they were told in a conference call that LG plans to retain its 4G and 5G core technology patents as well as core R&D personnel, and will continue to develop communication technologies for 6G. It has yet to decide whether to license out such intellectual property in the future, they added.

LG will provide service support and software updates for customers of existing mobile products for a period of time which will vary by region, it added.

– By AFP and Reuters

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