LG says it could exit the smartphone market

As usual, things are not going well for LG’s phone division. As reported by The Korea Herald, LG Electronics CEO Kwon Bong-Seok sent a memo to all staff indicating that the company is planning to make major changes to its smartphone division, possibly including leave the smartphone industry.

Korean media outlet TheElec also wrote about the memo last week in a now deleted post. The post was deleted because LG brutally debunked the report, calling it “completely false and unfounded”. This week, LG essentially confirms the same Korea Herald note report, with LG’s comments. The Verge also received a nudge from LG regarding the report.

“As the competition in the global mobile device market becomes increasingly fierce, it is time for LG to make a cold judgment and the best choice,” an LG official told the Korea Herald. “The company is considering all possible measures, including the sale, withdrawal and downsizing of smartphones.”

LG’s smartphone business has been suffering for some time. As the report points out, LG’s smartphone division has lost around 5 trillion won ($ 4.5 billion) in the past five years. The official earnings tally has the division at 22 consecutive quarters of money loss. Today, you won’t find LG on a “Global Smartphone Market Share” chart; instead, it will be buried in the “other” category. In the United States, Counterpoint owns LG at 13% of the market, mainly due to prepaid sales.

The LG Electronics CEO landed the job just 13 months ago and has undoubtedly evaluated LG’s only losing division over the past year. In an interview in January 2020, shortly after being named CEO, Kwon promised that “LG Electronics’ mobile business will be profitable by 2021”. It is still not clear if this is considered a reasonable goal for the company.

TheElec’s original scoop is saved and translated here. You should definitely take it with a grain of salt since the outlet has removed the post and isn’t standing behind it, but so far that seems to be correct. It has an interesting piece of information that isn’t in the other report: that LG will announce a direction for its mobile unit on January 26. TheElec also claimed that LG had sent a directive to “stop all development except for project i”, with “i project” being a codename for LG’s flexible screen LG Rollable smartphone. The last part of the report seems very plausible and talks about the possibility that the LG brand never really leaves the smartphone market and instead dumps the logo to various white label ODM companies.

Why would someone buy an LG phone?

LG never had a strong sales pitch for the smartphone war. In the high end of the market, LG has always seemed to be overshadowed by its biggest Korean rival, Samsung. It shipped high-end phones with heavy Android skins and a bad update plan, and when Samsung comes up with the same with more brand recognition, why would anyone choose LG? At the lower end of the market, particularly in the United States, the company has reliably shoveled inexpensive anonymous phones from carrier stores and the prepaid market. It’s something that needs to be done, but again, there’s nothing here that would make LG stand out from the crowd.

In fact, LG has a pretty bad reputation when it comes to building smartphones. The company’s phones are known to die prematurely and go into a “boot loop,” an unusable Android crash state where the phone repeatedly reboots due to bad flash memory. LG was sued for boot loops in 2017, with the lawsuit naming every top-tier LG device released in 2015 and 2016. LG eventually took hold. I know I have personally put down four Google Nexus 5Xs made by LG to rely on boot loop issues.

When the company wasn’t in the same lane as Samsung, it came out with ridiculous gadgets that would be forgotten a year or two later: there was the LG G5 with its modular accessories, like a clip-on camera grip; the inexplicably banana-shaped LG G Flex; and an obsession with various “dual screen” designs like the LG V10’s notification display, the LG V50’s second clip-on screen, and the LG Wing’s “T” -shaped design. You can see the company trying to do something different to stand out, but none of these ideas were good, or at least they haven’t been a hit with consumers.