LG says it might quit the smartphone market

As usual, things are not looking good for LG's phone division. As reported by The Korea Herald, LG Electronics CEO Kwon Bong-Seok sent out a staff-wide memo that the company was considering making major changes to its smartphone division, including possibly quitting the smartphone business.

Last week, Korean news outlet TheElec also wrote about this memo in a now-deleted post. The post was deleted because LG brutally debunked the report, calling it "completely false and without merit." This week, LG is confirming basically the same memo report from the Korea Herald, complete with comments from LG. The Verge also got a thumbs-up from LG about the report.

“Since the competition in the global market for mobile devices is getting fiercer, it is about 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 sale, withdrawal, and downsizing of the smartphone business.”

LG's smartphone business has been suffering for a while. As the report points out, LG's smartphone division lost about 5 trillion won ($4.5 billion) over the past five years. The official earnings count has the division at 22 consecutive money-losing quarters. Today you won't find LG on a "Global smartphone market share" chart; instead, it will be buried down in the "other" category. In the US, Counterpoint has LG at 13 percent of the market, due mostly to pre-paid sales.

LG Electronics' CEO only landed the position 13 months ago and has undoubtedly been evaluating LG's only money-losing division over the past year. In an interview in January 2020, shortly after being appointed CEO, Kwon promised "LG Electronics' mobile business is going to be profitable by 2021." It's still not clear if that's considered a reasonable goal for the company.

TheElec's original scoop is backed up and translated here. You should definitely take it with a grain of salt since the outlet deleted the post and isn't standing behind it, but so far, it seems to be correct. It contains an interesting tidbit that's not in the other report: that LG will announce a direction for its mobile unit on January 26. TheElec also claimed that LG sent out a directive to "stop all developments except for the i project," with "i project" being a code name for LG's flexible-display LG Rollable smartphone. The last bit of the report sounds very plausible in raising the possibility that the LG brand will never truly leave the smartphone market and will instead farm out the logo to various white-label ODM companies.

Why would anyone buy an LG phone?

LG has never had a solid sales pitch for the smartphone wars. At the high end of the market, LG has always seemed to be overshadowed by its bigger Korean rival, Samsung. It shipped high-spec phones with heavy Android skins and a bad update plan, and when Samsung offers the same thing with bigger brand recognition, why would anyone pick LG? At the low end of the market, especially in the US, the company has reliably shoveled cheap, anonymous phones into carrier stores and the pre-paid market. This is something that needs to be done, but again, there's nothing here that would make LG stand out from the crowd.

If anything, LG has a pretty bad reputation when it comes to building smartphones. The company's phones are known for dying early and going into "boot looping," an unusable Android failure state where the phone reboots repeatedly due to bad flash memory. LG was sued over boot loops in 2017, with the lawsuit naming every high-profile LG device released in 2015 and 2016. LG ended up settling. I know I've personally laid four LG-made Google Nexus 5Xs to rest over boot loop issues.

When the company wasn't occupying the same lane as Samsung, it was trotting out ridiculous gimmicks 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 clip-on second 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 was good, or at least they weren't a hit with consumers.