What LG’s smartphone exit means for the market
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In 2008, electronics giant LG released its first ever smartphone in the LG Incite. A few years before they’d beaten Apple to the punch by creating the world’s first ever touchscreen phone: the LG PRADA, created in collaboration with Italian luxury designer Prada. A decade and a half later, and the story came to a close with the announcement that LG would become the first major smartphone brand to withdraw from the market.
LG is expected to wind down its business completely by July 31, 2021 bringing to an end an era of smartphone history. Its last phone is likely to be 2020’s LG Wing, a rotatable, double-screen device as peculiar as some of the brand’s older phones: rollable ones, “self-healing” builds and those with 3D screens.
The South Korean company plans to focus its resources elsewhere from this year, leaving other smartphone makers – and their much more sensible wares – stronger than ever.
The Samsung stranglehold
LG’s presence in the smartphone business has been gradually eroded, draining almost $4.5bn in the last five years alone. Its market share, which was once among the top three in the world, has steadily dropped to less than 1% globally. In the meantime Samsung shot ahead of LG on every aspect of importance in the smartphone business with its Galaxy brand of phones: features, marketing budgets, and even price, with its mid-range Galaxy A phones.
Samsung wasn’t the only problem; LG is being pressured relentlessly in Europe by Xiaomi, OPPO and Vivo, and has no presence in Asia outside of Korea. But the smartphone business as a whole is becoming increasingly difficult to compete in.
The China question
Lack of innovation, consumer saturation with high phone prices and longer and longer upgrade rates have led to a slowdown in smartphone sales and hardware revenues. The smartphone market operates on thin margins, making it difficult for other manufacturers to compete without the similar scale of resources employed by Samsung and Apple, who have invested in their brands and put their financial might behind their hardware and software.
Politics also has a part to play in all this. The current US-China trade war means an inability to offer budget phones from Chinese companies like Xiaomi, Vivo and OPPO. This has made US carriers more dependent on Samsung and Apple, further strengthening the duopoly.
Luck in their stars?
However, LG’s exit is an opportunity for OnePlus and Google to gain share in the US postpaid mobile market. Both are known for the great cameras and high-quality imaging at competitive prices which consumers love.
LG was also well-positioned in the sub-$250 prepaid segment, so we can expect a portfolio shake-up with a chance for Motorola, Alcatel and Samsung to gain share in the US prepaid market. Without smartphones dragging it down, LG may go from strength-to-strength as it refocuses on electric vehicle components, IoT ware, robotics, and artificial intelligence.
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Main image credit: Tada Images / Shutterstock.com
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