Wednesday, April 7, 2021

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LG was done in by gimmicky designs, and little reason to stick with the brand

The once-proud smartphone maker LG is killing its phone lineup after years of losses, totaling $750 million in 2020. How did one of the original smartphone pioneers get crushed?

LG was beset by an inability to move beyond provocative designs and focus on creating a collection of worthwhile services and accessories to keep users coming back to the brand.

The electronics giant, which had plans to debut a rollable smartphone this year and unveiled its LG Wing rotating screen phone in September, simply couldn’t match what top-tier devices makers like Apple (AAPL) and Samsung had to offer in terms of functionality and an overarching ecosystem. LG said it is now focusing on "growth areas" including smart homes, robotics, and artificial intelligence.

“Essentially,” IDC analyst Ryan Reith told Yahoo Finance, “[LG] got their lunch eaten by the competition, because they didn't keep up with the changing times.”

It wasn’t just the top dogs that crushed LG, though. In addition to high-end phones that cost upwards of $1,000, LG also offered a host of entry-level and mid-range smartphones that started as low as $140. But it couldn’t compete with the influx of phones from low-priced Chinese competitors like Oppo and Xiaomi that survive off razor-thin margins.

Even Samsung continued to pound the space with its own low-cost phones packed with the company’s name recognition and capabilities including 5G cellular technology.

“LG was really trying to ... grab or maybe hold on to market share on both ends of that spectrum,” said Tuong Nguyen, senior principal analyst at Gartner, referring to the premium and budget markets.

He added: “And I think that is what makes it so difficult for not just them but any vendor in this market to compete, is that you're getting squeezed on both ends.”

LG was once a major smartphone player

LG’s demise has been brutally slow. In its heyday, when it was among the most innovative smartphone makers around, LG’s U.S. market share was a whopping 20%. According to Nguyen, the company was a significant force even as Apple was rolling out its iPhone 4s in 2011. LG still eked out 9% of U.S. smartphone market share in Q4 2020, good enough to make it the third most popular phone maker in the U.S.

Roughly a decade ago, at the height of its glory, LG pushed out impressive devices including its popular G series of phones. In 2012, Google even tapped LG to produce the company’s Nexus 4 smartphone. Google, however, eventually bought out the scraps of HTC when it left the market, and now pumps out its own Pixel line of phone.

LG, meanwhile, never transitioned from smartphone maker to ecosystem builder like Apple or Samsung, nor did it figure out how to make a profit pushing out budget phones. Sure, LG made a smartwatch here and there, but they never managed to take off.

While the big players were putting out innovative phones and new, appealing accessories like Samsung’s Galaxy line of smartwatches and Apple’s Airpods, LG was pushing out weird phone designs. This year, during the consumer tech show CES, LG showed off a new phone with a screen that unrolled from its body like a window shade. Sure, it looked cool. But the LG Rollable had little chance of ever becoming a volume seller because, well, who needs a phone with a screen that rolls out?

“That's great design — they're one of the leading edge [companies] that have designed incredible phones over the years,” IDC’s Reith said. “But just because you put something like that out, doesn't mean people will buy it.”

At the same time, less expensive Chinese brands like Oppo and Xiaomi LG’s mid-range and entry-level phones were undercutting LG’s budget phones. Samsung, which just launched its first sub-$300 5G smartphone, was also pushing LG further to the fringes of the industry until it no longer had a place at all.

The end was inevitable. While LG was producing its Wing and Rollable, its smartphone business was hemorrhaging money. Over 23 consecutive quarters, that’s about six years for those keeping score, the company lost a whopping $4.5 billion.

This all made for an untenable environment, spurring LG to announce this week it’s leaving the “incredibly competitive mobile phone sector.” In the end, LG’s global market share dropped from 10% just 10 years ago, to 2% today. Apple and Samsung hold 21% and 16%, respectively, while Xiaomi and Oppo have 11% and 9%.

There are still budget-friendly phones out there

While you’ll no longer be able to get an LG phone, you can still find plenty of entry-level and mid-range brands.

Samsung, which offers entry-level and mid-range phones through its Galaxy A line of devices, will likely be the manufacturer of choice for LG’s former customers looking for a smartphone that won’t break the bank. In addition to launching the company’s first sub-$300 5G smartphone, Samsung’s debuted its new Galaxy A02s, which starts at just $109 and offers a multi-camera setup and promises all-day battery life.

That’s exactly the kind of package for consumers who want the capabilities of a pricier device without draining their bank accounts. What’s more, those phones get you in the door with Samsung’s line of headphones, earbuds, and smartwatches.

With these offerings, Samsung seems poised to pick up LG’s market share. And if you’re an LG loyalist who’s not eager to defect, you better make that vintage LG phone last as long as you can.

By Daniel Howley, tech editor. Follow him at @DanielHowley