LG Electronics, which became the world’s third largest manufacturer of mobile phones, announced that it will no longer produce this type of technology after accumulating some 4.4 billion dollars (3.75 billion euros) in losses in the last five years.
The South Korean company, which has a plant in Brazil, communicated the decision stating that it is leaving the “incredibly competitive mobile telephony sector” to focus on other spaces that it considers more profitable.
Among the segments in which it sees potential and hopes to focus its resources are components for electric vehicles, future 6G technology, robotics, home automation or artificial intelligence, the Seoul-based company explained in a letter published today.
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The decision promises to directly affect the operations of the plant that LG has in the municipality of Taubaté (São Paulo state), where it has some 1,000 employees who are dedicated to assembling smartphones, screens and laptops.
Given the rumors about the closure of LG’s telephony business that have occurred in recent weeks, the union representatives of this factory already told the Sao Paulo media at the time that they fear for the future of about 400 of these jobs.
The South Korean company simply stated in the aforementioned statement today that “it will work together with suppliers and partners throughout the process of closing our mobile phone business” and that “details related to jobs will be determined locally.”
The technology company had been reorganizing the personnel of its telephony branch for some time and assigning them to other less deficit segments.
In recent years, LG had focused almost all its manufacturing resources in the Mobile Communications division in Vietnam and, in addition to Brazil, it had some operations in India and China.
South Korean media indicated, citing sources close to the matter, that before adopting this decision the company tried to sell, without success, its business to the Vietnamese conglomerate Vingroup, in addition to the Volkswagen group.
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After announcing the closure, LG indicated that its inventory of smartphones currently available will continue to be for sale and that “it will provide support in terms of service and software updates for customers of existing mobile products for a period of time that will vary by region.”
LG expects “that the liquidation of the mobile phone business will be completed by July 31 next, although inventories of some existing models would still be available after that date.”
Going forward, the company promises to continue to leverage “core technologies developed during two decades of mobile business operations” to apply to “existing and future products.”
It is assumed that its exit from this market will mean a short-term drop in its turnover, but many South Korean analysts believe that it will clean up its accounts and that its operating profit for all of 2021 could increase by one trillion won (about 885 million dollars). ) after the abandonment of mobile telephony.
The decision to close comes after LG pointed out in its last earnings presentation in January that the future of this division, in the red since the second quarter of 2015 and with accumulated losses worth about 5 trillion won (about 4,434 million dollars), was open to “any possibility”.
Sales of the model with which it aspired to gain ground in the mid-range, the Wing dual-screen smartphone, or the more exclusive Velvet have not been good enough to convince the management.
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Neither was the expectation generated by the Rainbow, the folding mobile that captured the attention of many at CES in Las Vegas in January and that will surely no longer see the light of day.
And so, with the high-end dominated by Apple, Samsung and some Chinese manufacturers and the push from a growing number of Chinese competitors already controlling the low-end segments, LG has made the decision to close an operation that began when it founded LG Information & Communications in 1995 to produce telephones.
That business unit would be absorbed by LG Electronics five years later and the company would become the third largest mobile phone manufacturer in the world.
The eventual dominance of smart devices would eventually damage its business, to the point of currently occupying the ninth position globally, with just a 2% global market share after selling 24.3 million smartphones last year (13% less than in 2019), according to the consultancy Counterpoint Research.