In early April, LG announced it would be shutting down its long-struggling smartphone business by July 31^st, 2021. The move did not exactly come as a surprise; LG’s mobile division had been running at a loss for 23 consecutive quarters, the company had hinted at hard decisions ahead for its mobile division, and rumors have swirled about the company being unsuccessful at attempts to find a buyer for the unit. Nonetheless, the move marks a significant exit by a major brand - and is a sign of the competitive realignment and stratification now afoot within the smartphone industry.

LG has always struggled to find its footing in the market, competing in the shadow of Samsung and frequently unsuccessful in its attempts to differentiate via unique features, functionality, or add-ons that fell flat with consumers. Though the company was admired for its willingness to try unconventional ideas and functionality, such as the dual-screen LG Wing, it was never able to find its positioning / footing with consumers during the pivotal last 5 years of the smartphone market.

Though LG’s CEO Kwon Bong-Seok promised in 2020 that the mobile business would be profitable by 2021, the competitive nature of the market combined with changes in consumer taste arguably ensured that LG would be unsuccessful.

Consumer demand has shifted, as the high-end smartphone segment has declined as a source of sales growth in a price-sensitive environment where a limited market seeks $1000+ smartphones. Accentuated by pandemic-driven budget concerns for consumers, the pent-up demand for more-affordable smartphones has resulted in manufacturers now focusing on budget and midrange segments as sources of sales growth for the future.

The smartphone market is one with considerable competition-based barriers to entry for any new competitor at this point. To that point, LG’s already-struggling mobile division found itself squeezed between significant competitive forces within the Android mobile device sector. The market is dominated on one side by a vertically integrated front runner with the industry’s largest marketing budget (Samsung), on the other by a major consumer ecosystem vendor (Apple), and surrounded by a cast of hungry value-based competitors fighting over what’s left. Samsung’s recent pivot to launch a full salvo of models across multiple levels of affordability - its Galaxy A, F, and FE models – narrowed LG's opportunities even further. LG’s exit underscores the stratification that is taking place in the market. It is likely one or two more brand exits will take place over the next few years as the pandemic-related 2021 recovery for the market dissipates over time.

For LG, it’s an unfortunate goodbye to a long-running product category for the brand, but allows the company to more tightly concentrate on areas where it has better business performance and stronger alignment with market needs. Smart TVs, where LG is regarded to hold a #2 position globally, is a category where LG can fruitfully focus its efforts and entrench its position against growing competition. The time is ripe, as consumer smart TV adoption continues to grow steadily – Parks Associates data shows that smart TVs are now owned by 56% of US broadband households.

The ultimate winner in all such hypercompetitive situations, as always, is the consumer – 2021 is a year where the screen sizes, battery life, camera quality, and even build quality offered at any given price tier are all a considerable step up from similarly-priced options even just 6 months ago. For the world’s budget and midrange smartphone consumers, 2021 is a banner year to purchase a new phone or upgrade an aging one.

For more information about Parks Associates research, visit http://www.parksassociates.com or call 972-490-1113.