the company withdraws from the market due to losses | Tec Review

LG Electronics’ Wing smartphone is displayed in a store in Seoul, South Korea. This is one of the latest models to be sold by the company. (Photo: REUTERS / Kim Hong-Ji)

LG Electronics, a South Korean company, which became the world’s third largest mobile phone manufacturer, announced that it will no longer produce this type of technology after accumulating this segment some 4.4 billion dollars in losses in the last five years.

The South Korean company, which has a plant in Brazil, announced the decision stating that it is leaving the “incredibly competitive mobile telephony sector” to focus on other spaces that it considers more profitable.

Segments where it sees potential and hopes to focus its resources include components for electric vehicles, the future 6G technology, the robotic, the home automation wave artificial intelligence, the Seoul-based company explained in a statement.

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Brazil could lose thousands of jobs

The decision promises to directly affect the operations of the plant that LG has in the municipality of Taubaté, in Sao Paulo, where it has about 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 limited itself to noting 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 sought to sell, without success, its business to the Vietnamese conglomerate Vingroup, in addition to the Volkswagen group.

LG will be collectible the company withdraws from the marketMock old version of LG Electronics’ smartphones are on display in a store in Seoul, South Korea (Photo: REUTERS / Kim Hong-Ji)

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Your LG phone will be a collector’s item

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 that will vary by region.”

LG foresees “that the liquidation of the mobile telephony to be completed by July 31, although inventories of some existing models could still be available after that date ”.

Going forward, the company promises to continue to make use of the “core technologies developed during the two decades of business operations with mobile phones” to apply them to “existing and future products.”

It is assumed that your exit from this market will mean a short-term drop in your turnover, but many South Korean analysts believe that it will clean up their accounts and that its operating profit for all of 2021 could increase by one trillion won (about $ 885 million) following 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”.

LG velvet

The 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.

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 that already control 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. (EFE)