The LG story: It is better to quit than crib

The technology driven brands like Xiaomi will be posing larger challenges to already established players like LG.

Yet again, a brand having great legacy has succumbed to the Chinese pressure and rising losses over the years. A brand we can all easily identify is LG Electronics. The South Korean electronics major has decided to put an end to its smartphone business across the world and that includes India as well, confirmed spokesperson at LG.

The Korean brand said, “LG’s strategic decision to exit the incredibly competitive mobile phone sector will enable the company to focus resources in growth areas such as electric vehicle components, connected devices, smart homes, robotics and artificial intelligence.”

Faisal Kawoosa, founder and chief analyst at techARC said, “LG never was able to reach a market standing where it would have liked to be in smartphones.  Essentially, after Chinese OEMs came to play, it started losing the battle. Somehow, I feel it never fought it and was always a fence sitter in the battle. Compared to this look at Samsung. Samsung took the smartphone business as seriously as any other CE category and the difference is visible to all.”

The third-largest smartphone brand in the United States has been mulling over this strategic move due to rising revenue losses of close to USD 5 billion but it never happened eventually. Now that global competition and the wafer-thin margin has forced LG to proceed with the closure of its mobile business.

LG is among the top innovators in the smartphone business over the years. Its innovations at the annual show CES have always been crowd-puller. The brand has been known for its marvellous displays and ultra-wide cameras. Recently they had introduced Velvet and Wings series to its smartphone portfolio but even those failed to make a mark on the actual purchase. LG was supposed to launch rollable smartphones soon but it won’t be happening now because it’s going to wind up its smartphone business completely by July 2021.

Analysts Quote

Prabhu Ram, the head of Industry Intelligence Group (IIG) at CMR points, “LG has not been able to face up to the relentless challenge from Chinese smartphone players, and, especially their aggressive product pricing and marketing initiatives.  That said, LG has strong mobile R&D and innovation capabilities, as seen in its recent initiatives to reinvent the rectangular mobile phone. Unfortunately for LG, its innovation prowess could not translate into market gains.”

According to research firm, Counterpoint, LG had shipped 28 million phones last year. “Certainly this is a difficult decision however LG’s strategic decision to exit the incredibly competitive mobile phone sector will enable the company to focus resources in growth areas,” said LG.

Upasana Joshi, IDC India associate research manager (client devices) agrees with Prabhu and says, “LG has been a very small player in the smartphone market with fewer launches in comparison to other OEMs. India’s 85%+ market is concentric and dominated by leading 5 brands of which 4 are China-based leaving less room for remaining players to establish strong footholds. While LG is more prominent in the white goods category, has lesser-known products or visibility in the smartphone domain, and lacks marketing initiatives/investments. On the contrary, the other smartphone players have an array of product portfolio spread across price points and very price aggressive with high decibel marketing activities, garnering more consumer mind share and volume.”

“I believe LG adopted CE strategy to a dynamic and brutal product like smartphones. It believed its strong distribution will push the product like Panasonic did, which never works at least in smartphones. Yes, the channel does push smartphone brands even today, but then they are also complementing it with proactive outreach to customers directly,” Faisal quoted.

The Same Old Story

LG is not the first brand in the electronics industry to have gone through this. We have seen well-known mobile brands such as Blackberry and HTC biting dust. Sony had to take the same route due to the rising Chinese onslaught to call off its smartphone business. Nokia had also struggled and almost vanished from the scene but came back riding with Finnish firm HMD Global. Nobody remembers Panasonic for its smartphones now. It is evident that Samsung and Apple are going to get the pie out of it.

Faisal believes, “I think it’s already strong in that. In some segments, it’s leading or in the top two. I don’t see smartphone BU was retarding its growth prospects in other segments, so won’t impact them after exit from smartphones.”

Chinese smartphone makers have one way or the other have democratized the mobile market across the world and in India as well. Their cost of production or time to the market has been much lower than what LG or HTC had to bear. The Chinese vendors also worked on every aspect of a smartphone with great detail. They did proper market research and thus how they are successful.

The Next Move

LG is all decked up for its focus to shift entirely into the appliances segment and is not unknown to this territory rather, on the contrary, LG is the second most preferred brand in smart television. Last year, it also tied up with Magna International, an automotive supplier, for electric vehicles. “We will continue to strengthen our product leadership across the consumer durable industry,” said LG.

Upasana does not seem to agree with what LG has to say. She mentions, “With technology-driven brands like Xiaomi, having multiple product categories, will soon be classified as a lifestyle brand similar to Samsung, thus posing larger challenges to already established players like LG.”

The South Korean brand is quite familiar with the demands all over and has to work accordingly. It has got nothing to lose rather can bounce back even stronger in the appliances market with all the focus and dedication. It has been a trusted name in Indian households as well so I do not think so that LG is going to face any difficulty because of its absence from the smartphone market.

“LG is positioned for continued success in its core consumer electronics business. In addition, LG will be keen to make progress on emerging opportunities, including in electric vehicles, and in smart homes,” added Prabhu.

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