South Korea’s LG Electronics’ decision to exit the competitive mobile phone sector will not lead to job losses in India as LG India has decided to internally absorb the employees involved in its mobile phone business unit, the company has clarified in a response to BusinessLine’s queries.
However, the fate of its manufacturing plant in India is not known as the firm declined to comment on the matter. When asked about possible job losses, an LG India spokesperson told BusinessLine that it will be internally absorbing the employees involved in its mobile phone business unit. “With our strong legacy in India and a vast product portfolio spread across business verticals, we have ample opportunities to retain the talent, currently working under the mobile division. As a company, we will internally absorb the employees, keeping in mind their core expertise,” the spokesperson said.
Impact on Indian biz
LG’s exit from the mobile phone business will have no major impact on its business in India as the company’s market share in smartphones in the country accounts for less than one per cent, analysts tracking the sector told BusinessLine.
In India, LG had just a 0.15 per cent market share in smartphones in 2019 and 0.3 per cent in 2020, said Shilpi Jain, Research Analyst, Counterpoint Research. “LG’s closure of its mobile business would not have much impact on its business in India as India was not one of their strategic markets for their smartphone business,” she explained, as affirmed by other analysts.
“For LG, India was a veryinsignificant market for smartphones,” said Anshul Gupta, senior research director at Gartner.
Tough competition
In India, 85 per cent of the smartphone market is dominated by five players, with four out of these being Chinese brands, Upasana Joshi, Associate Research Manager, Client Devices, IDC India pointed out, adding that LG’s launches in the smartphone segment cannot be compared to these players. The company also lagged in terms of its marketing activities, a far cry from the high decibel marketing presence of Chinese companies in the space, she further stated.
In India, it faced cut-throat competition from Chinese brands in the mid-tier segment and Apple, Samsung and OnePlus in the premium segment, affirmed Jain. “Its share has been stagnant in the Indian market. Though it had access to great technology and products, it lacked a go-to market strategy. Though it had a good chance in the premium market, the product portfolio was more focussed toward the North American and Latin American markets,” Jain explained.
Globally, LG’s smartphone business has been contributing negative EBITDA to its overall business, Gupta pointed out. The move to exit — on a global level — must have been prompted by the pressure on market share, unit sales and margins; the lack of profitability of the smartphone business in the past 4-5 years; as well as the competition from Chinese brands, he explained.
LG’s biggest markets are North America and Latin America, which account for more than 80 per cent of its smartphone sales, said Jain.
Focus areas
LG’s statement on Monday said: “LG’s strategic decision to exit the incredibly competitive mobile phone sector will enable the company to focus resources in growth areas such as electric vehicle components, connected devices, smart homes, robotics, artificial intelligence and business-to-business solutions, as well as platforms and services.”
When asked how LG India will contribute to these areas, the company’s spokesperson said: “Certainly, this is a difficult decision. However, LG’s strategic decision to exit the incredibly competitive mobile phone sector will enable the company to focus resources in growth areas. We will continue to strengthen our product leadership across the consumer durable industry.”
