The end of LG smartphones – changes in the technology market
Recently, LG issued a statement that it is abandoning the smartphone business. Once a pioneer in this segment, the corporation now plans to focus on more profitable products. LG wants to start producing components for electric cars and internet-connected devices that are used in smart homes. Robotics, artificial intelligence, B2B solutions are another area the South Korean giant wants to focus on.
LG in the country on the Vistula river
Today, LG is the fourth largest company in South Korea, after Samsung Group, Hyundai Motor Group and SK Group. The company was established in 1958 and initially the corporation was engaged in manufacturing of audio equipment (radio and automatic telephones). Seven years after its founding, the conglomerate decided to produce refrigerators, then focused on TVs, air conditioners and automatic washing machines. In the 1970s, the conglomerate decided to merge with Lucky Chemical Company, thus expanding into the chemical market.
In 1997, LG entered the Polish market. Two years after the holding entered our country, construction of factories began – the first one was established in Mława, where about 3,000 people are employed. people. The production line is based on assembling high-quality TV sets. In 2005, LG Group established a subsidiary near Wroclaw, Poland, where a half-billion-euro factory was built on a 275-hectare site. Lower Silesia unit produces liquid crystal displays and refrigerators. Revenues from sales of products manufactured at LG Electronics Wroc³aw amounted to just under PLN 4.9 billion, while the M³awa branch generated a profit of PLN 4.3 billion.
Changes in business scope
LG released information that the board approved the decision to abandon smartphone production. The unexpected move follows decisions made in January 2021. At the time, it was announced that the company was reviewing the direction of its smartphone business. Liquidation of the manufacturing division will be completed on July 31 this year. The manufacturer does not intend to recall the introduced phones from the market. If we see phones with the LG logo after this date it will mean that they come from earlier deliveries. The company reassures its customers – it indicates that it will provide service support and plan software updates for current devices. For some more time, the South Korean holding company will work with cell phone suppliers and business partners.
Direction of activities
LG smartphones have long held the number three spot in U.S. sales. The company plans to leverage its resources and expertise in mobility by expanding its 6G business. Core technologies developed over the past two decades of cell phone business will not go to waste. The corporation intends to retain them and apply them to existing and future products. The Korean company focused on the production of mid- and high-end smartphones. The segment has recently seen strong competition and expansion from new players, mainly from the Chinese market. Holdings such as Huawei, Xiaomi, One Plus, Oppo, Vivo and erstwhile HTC are launching products that are much more profitable for the consumer. LG fares much worse than its competitors in terms of value for money.
Software is a gold mine
Many technology manufacturers choose to invest in software development. Software offering mobile payments generates big money for corporations. In 2017, LG launched such a platform. Two years later, Samsung introduced a similar solution by offering the Samsung Pay payment system. This feature became a big competition for LG and made the Korean product no longer as interesting as Samsung’s product.
The business system ensured success?
LG has long been overly dependent on two markets – South Korea and North America. Experts point out that the one element that has kept LGs afloat for many years is the management system. In fact, by applying vertical integration, the conglomerate has “spread the forces”. The model consisted in combining technologically separate phases of production, sales, distribution or other processes in one company. Such a system resulted in the creation of LG Display (displays), LG Chem (batteries), LG Innotek (cameras), Silicon Works and LG Electronics (consumer goods).
LG manufactures TVs, audio equipment, home appliances and air conditioners. Giving up smartphone production seems reasonable. Given the strong competition and expansion of Chinese conglomerates in this sector, we are not surprised by LG’s decision to abandon its activities in this area. Investing in artificial intelligence, creating parts for electric cars and developing software seems to be more profitable.