LG officially announces its exit from smartphone business

LG said in a regulatory filing that its mobile communications business unit will no longer make and sell mobile phones after July 31, citing a prolonged downturn in the business and fierce industry competition.

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The decision comes two months after LG said its mobile communications business remained open to "all possibilities" for future operations.

LG's mobile communications business has been in the red since the second quarter of 2015. As of last year, the division's cumulative operating losses had reached about 5 trillion won ($4.5 billion).

LG previously held talks with Germany's Volkswagen AG and Vietnam's Vingroup JSC on selling its smartphone business, but the talks failed, according to industry insiders.

LG said its exit from the mobile communications business would lead to a decline in the company's revenue in the short term, but would ultimately improve its financial situation and management efficiency in the long term.

Analysts say LG could add 1 trillion won to its operating profit this year if it exits its loss-making mobile business.

LG has been improving its mobile business in recent years, including shifting its smartphone production base to Vietnam while expanding outsourcing deals.

In order to boost sales of high-end smartphones, LG launched the Explorer Project last year, a new mobile product category that the company aims to provide terminal devices with different form factors and upgraded mobile experiences. Under the project, the company released Wing, a dual-screen smartphone with a swivel form factor, last year, but the sales of the product were not good.

This year, LG planned to officially launch a rollable OLED display smartphone after showing it at CES 2021. However, reports say the company has canceled the plan.

Analysts say LG's efforts are not enough to turn things around as it is eclipsed by Samsung Electronics and Apple's dominance in the high-end market and unable to compete with Chinese brands in the cheaper smartphone segment.

"LG's strategic smartphone models, such as Velet and Wing, have underperformed, and the company has lost its footing in the premium smartphone market as the peak of 5G momentum has passed, leaving it with few remaining cards to play," said Koh Jung-woo, an analyst at NH Investment & Securities. "Its rollable smartphone caught the industry's attention at CES, enough to boost its technological prowess, but is unlikely to generate meaningful sales."

LG, the world's ninth-largest smartphone vendor with a 2% market share, shipped 24.7 million smartphones last year, down 13% from the same period in 2019, according to market research firm Counterpoint Research.