Why LG Is Shutting Down Smartphone Business: Lessons For Investors

LG Electronics, South Korea’s second-largest appliance firm after Samsung has announced that it will shut down its smartphone manufacturing division.

The mobile phone business arm has continued to witness losses in billions of dollars in recent years.

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

But it has long struggled to increase sales, entering the market late in a competitive market that have witnessed the emergence of cheaper Chinese rivals such as Huawei, Vivo, Itel.

LG Smartphone
LG Smartphone

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 percent or more was in the second quarter of 2018.

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.

The decision will enable the firm to “focus resources in growth areas such as electric vehicle components”, robotics and smart homes, it added.

Businesses that are unable to keep up with new updates, meet up with market demand and become the first movers in any area may not survive in a competitive market. Rather than chasing shadows, companies can either scale up research and employ capable hands or quit in underperforming areas to focus more on business divisions with comparative advantage.

Source: AFP

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