Why LG stopped making smartphones
LG, the Korean electronics group, was one of the smartphone market’s first movers. Now it has joined a group of has-beens, such as Nokia. Matthew Partridge reports


Korean electronics company LG is giving up on making smartphones after it admitted that it can’t cope with increasingly intense competition, says James Titcomb in The Daily Telegraph. The news is a major milestone as LG was an early mover in the mobile market, beginning production in 1995 and later pioneering the use of a touchscreen even before Apple launched the iPhone. While its market share peaked in 2009, even in 2013 it was still the world’s third-biggest mobile-phone manufacturer. LG’s departure adds to a growing “graveyard” of phone makers such as Nokia, BlackBerry and Motorola, which previously dominated the industry before falling away.
A penchant for gimmicks
While the Korean giant’s devices have “dwindled in popularity”, retaining barely a 2% share of the market, the halt to production still triggered an “outpouring of nostalgia on social media”, says Michelle Toh on CNN. Fans suggest that while LG wasn’t always successful, the company deserved some credit for its “willingness to innovate”, with some arguing that it was responsible for features that have since become mainstream, such as “ultrawide cameras”.
Nonsense, says Ron Amadeo on Ars Technica. The simple fact is that its phones “were never good” as the company “ping-ponged” between “building exactly what Samsung was building – but with less marketing and brand recognition”, and “unappealing gimmick phones with no rationale behind them”. The latter included “stinkers” such as the LG G Flex in 2013, where “the entire body was shaped like a banana for no reason at all”. What’s more, LG often alienated customers with “poor build-quality” and “shoddy craftsmanship”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
More broadly, LG has suffered from the fact that the smartphone industry has become bifurcated, say Kwanwoo Jun and Timothy Martin in The Wall Street Journal. On the one hand, “high-end” devices from Apple and Samsung “can fetch $1,000 or more” thanks to the sheer power of their brands. On the other,“lower-end firms “selling handsets for just several hundred dollars have eked out profits by outsourcing the engineering and design work”. LG’s phones were in the latter category – yet its other products, such as flat-screen televisions and kitchen appliances, “compete with the top players” for cash-rich buyers. It made sense to ditch the struggling phones and focus on the top of the market in other areas.
The move is a victory for investors who called for the company to “wind down” the smartphone business, says Song Jung-a in the Financial Times. They said it constituted a “misallocation of resources”, weighing on LG’s market value despite “robust sales” of premium home appliances and televisions: the mobile-phone business “has posted cumulative losses of nearly $4.5bn over the past five years”. Free of the burden, LG is expected to shift more of its resources to the “fast-growing” electric-vehicle components business.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
-
Gold’s allure and why you should never 'pay a premium for graded coins'
It is easy to become distracted by the beauty of gold, but remember why you buy it, says Dominic Frisby
-
A rebound in UK's commercial property – should you invest?
UK commercial property's three-year bear market finally appears to be over, says Max King
-
Investment opportunities in the world of Coca-Cola
There is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?
Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
The next phase of the AI boom
The technology is about to become far more widespread, says Dan McEvoy. Here’s how to profit
-
'Pension funds shouldn't be pushed into private equity sector'
Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
The strange world of quantum computing
If we can harness the potential of quantum physics, modern computers may come to seem like plodding calculators in comparison with the machines of the future
-
Greg Abel: Warren Buffett’s heir takes the throne
Greg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?
Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.