Why Did LG Electronics Close Down Its Mobile Phone Business?

Another former mobile phone giant has left the stage of history.

LG Electronics announced on its official website on April 5 that it would shut down its mobile phone business unit. Earlier in the day, the company's board of directors passed the resolution.

It is understood that the specific closing time of LG electronic mobile phone business will be July 31 this year, but the inventory of some existing models will continue to be sold. At the same time, even if the relevant business is shut down, LG Electronics will still provide existing mobile product customers with service support and software updates for a period of time.

LG Electronics said that withdrawing from the extremely competitive mobile phone market will enable the company to concentrate its resources in growth fields including electric vehicle parts, smart home, robots, artificial intelligence, B2B solutions, etc. "in the future, LG will continue to use its accumulation in mobile technology to develop related technologies, so as to further enhance its competitiveness in other business areas."

However, some people from LG China after-sales service center told the 21st century economic report that LG China has not been informed of the closure of mobile phone business, and it can still provide mobile phone after-sales service normally.

"LG mobile phone history performance is relatively general, but the era span is very long, from the traditional mobile phone era to the smartphone era, LG has crossed two eras." Pan Helin, executive director and professor of the Digital Economy Research Institute of Central South University of Finance and law, commented to the 21st century economic reporter that "the main reason why LG's mobile phones Miss smart phones is the lack of innovation ability. The technology has been shrouded in the shadow of Samsung, and the user experience of smart phones has no sense of breakthrough, and finally declined."

The decline of the former giants

"I didn't expect LG phones to be history." A former LG mobile phone user sighed to the 21st century economic reporter.

The user reported to the reporter the purchase order of LG mobile phone online in 2010 and 2011. One is a 2G mobile phone of LG gs290 cookie series, which is sold at 759 yuan, and the other is a LG p3553g smart phone with a price of 1199 yuan.

"When I first bought the LG mobile phone, I thought it was very beautiful and colorful. Moreover, the series name of" cookies "was in line with the psychology of girls. It felt sweet." Talking about why he bought the LG mobile phone, the user recalled that when using other brand function machines, he was full of curiosity and favor for the "chocolate" and "Lollipop" series of LG mobile phones - mainly because of the candy name.

Later, when the phone was changed, the user chose the fourth-generation cookie mobile phone, the LG gs290. And in a year later, he trusted LG mobile phone again and bought LG's 3G smart phone.

"After that, however, it was replaced by a more popular iPhone." The user said that LG's smart phones often have crashes, fever and other phenomena, and the experience is not good. After trying a friend's Apple phone, the user chose to "switch.".

The user's experience also coincides with the fate of LG mobile phone. In 2006, LG mobile phone launched the "chocolate" mobile phone, which became popular all over the world with its fashionable and light-weight shape and the slogan "I chocolate you".

At that time, it was reported that LG "chocolate" mobile phones sold more than 7.5 million units a year, setting a sales myth at that time. In 2008, LG Electronics said that its global mobile phone sales exceeded 100 million, becoming one of the world's third largest mobile phone manufacturers. Since then, LG has launched a series of mobile phones, such as "ice cream", "Lollipop" and "chocolate", which are favored by young consumers with its fashionable line, colorful appearance and main self shooting lens.

But the worries are beginning to show. According to Gartner statistics, the global market share of LG mobile phones was 7.1% in 2010, and it remained the third largest in the world. However, compared with the global market share of 10.1% in 2009, LG's sales share has begun to decline.

LG mobile phone's global market share is mainly affected by its smart phone strategy. Although Apple released its first smartphone as early as 2007, LG did not enter the smartphone market until 2009, and chose OMS instead of Android, which is better evaluated, as its operating system, which made it miss the first gold rush in the intelligent era.

Since then, LG Electronics has faced the impact of Samsung, apple and a large number of Chinese smartphones, and voluntarily abandoned the Chinese market in 2018. This also means that LG Electronics has lost the mobile phone market with the greatest growth potential in the world, which also lays the groundwork for its subsequent downturn.

"The smartphone market has entered the Warring States period. There are only two ways to survive: to build core competitiveness, or to focus on high cost performance. As one of the kings of the past, LG mobile phone is not high, low is not. " Wu Yijie, a guest lecturer at the space China Business School of the University of Hong Kong, told the 21st century economic reporter, "therefore, the failure of LG mobile phone is not accidental; it also gives a warning to the existing market participants: we must establish the core competitiveness through continuous innovation, otherwise we can only survive by playing cost-effectiveness."

Losses for many consecutive years

According to the financial report, LG mobile began to lose money in the second quarter of 2015. By the fourth quarter of 2020, the cumulative loss of the division was as high as 5 trillion won (about 29.38 billion yuan). Whether to shut down or sell is a question for LG mobile phones.

Facing the continuous loss of mobile business, LG Electronics is not without a way out. In December 2020, LG Electronics reorganized it, cancelled the core Department of MC (mobile communication) business headquarters and established ODM (original design and manufacturing) business unit.

After the restructuring, LG Electronics will be low-end mobile phone business outsourcing. Data shows that the proportion of mobile phone ODM of LG Electronics is increasing year by year. In 2018, the proportion of ODM is only 10%, reaching 30% by 2019, and is expected to reach 60% in 2020 and 70% in 2021.

However, the move did not save LG's mobile phone business. In January 2021, it was reported that LG Electronics was studying various solutions including the sale of mobile business.

However, at that time, LG Electronics official attitude was firm, to refute the rumor.

According to a source, LG Electronics had held talks with vingroup, Vietnam's largest private enterprise, on the sale of its smartphone business unit, but the negotiations failed. Now LG mobile phone has officially withdrawn from the stage of history. It's not a sale, it's a shutdown. It's a sad fate.

In the view of many commentators, the exit of LG mobile phone business is not difficult to predict. "LG's mobile phone business, which lacks core technology, can't start selling, which may be the reason why it chose to shut down rather than sell." Wu Yijie said.

"LG's brand effect can't compete with the three Chinese giants (Xiaomi, oppo and vivo) with high cost performance. In the high-end market, LG does not have the vertical manufacturing capability of the whole industry chain of core mobile phone components such as chips and memories, unlike apple, which has IOS system as a moat, and Huawei does not invest 15% of its annual operating revenue for R & D. now, 5g patents rank first in the world 1、 It's not a good idea Wu Yijie pointed out, "therefore, the failure of LG mobile phone is not accidental."

But beyond the mobile phone business, LG's story continues. Facing the future, LG Electronics said that it will focus on the fields including electric vehicle parts, smart home, robot, artificial intelligence, B2B solutions, 6G and other fields.

"LG's main rival is Samsung. Due to its poor technical capability, LG has two choices. One is to follow Samsung's rhythm to become a second-class brand in the mobile phone industry, and the other is to focus on the segmentation field." Focusing on the current strategy of LG Electronics, pan Helin analyzed to the 21st century economic reporter that "LG has chosen to go up, such as investing in OLED display field, and staggering the horizontal competition with customers."