South Korean multinational electronics company LG Electronics is closing its loss-making mobile communications division in order to streamline operations and focus on future projects such as electric vehicle components.
The company said in a statement that the company will cease production and sales of mobile phone products on July 31 to devote resources to areas of growth such as EVs, smart homes, robotics, and artificial intelligence (AI).
LG will provide service support and software updates for customers of existing mobile products for a period of time which will vary by region, the South Korean company said.
Phones accounted for 8.2 percent of LG sales last year, and while there will be a short-term revenue loss but the company expects the closure will be financially beneficial in the long run. It will expand its auto-parts business and continue to develop mobile technologies such as sixth-generation networking and cameras, the company added.
As per the reports, “Shares rose as much as 4.1 percent in the wake of the announcement. Affiliate LG Display Co. also climbed as much as 6.3 percent.”
LG was a pioneer of the Android operating system, cooperating with Google on the Nexus smartphone line and producing some of the category’s best camera and display technology in its early days.
In the US, the company was third behind Apple’s iPhone and fellow South Korean giant Samsung Electronics, but it hasn’t been competitive for years and the Chinese upstart OnePlus has since replaced it amid a global loss of market share to overseas rivals, according to the reports.
Earlier this year, the company has stated that it would review the direction of its smartphone business, following the announcement that it would sell a rollable phone this year. The firm held talks over a potential sale but negotiations failed due to big differences in valuing technology patents, the reports say.
LG has been expanding its vehicle components business and has formed a joint venture with Magna International to manufacture key parts for EVs. Shares of the Seoul-based electronics manufacturer have risen more than 30percent since the announcement, fueled by hopes that the collaboration will help Apple’s EV project.