LG phones
Source: LG Newsroom

Is LG Going Out of Business? Cellphone Users Face Troubles

Mohit Oberoi, CFA - Author
By

May 24 2022, Published 9:18 a.m. ET

Several people with LG smartphones have experienced issues using their phones and have been getting repeated “LG IMS has stopped” messages. Is the electronics company going out of business?

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LG is among the largest electronics companies globally. It's based in South Korea, where rival Samsung is also based. South Korean electronics companies have been facing stiff competition from their Chinese counterparts.

LG closed its smartphone business.

The rise of Chinese smartphone companies triggered a price war in the smartphone market. In 2021, LG announced that it would exit its smartphone business. LG was the third-largest player in the North American smartphone market behind market leader Apple and runner-up Samsung. LG had a nearly 10 percent share of the market and had a strong position in the bundled market where it partnered with telecom providers.

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However, the company’s competitive position was weak globally. It was the third-largest smartphone company in 2013 but gradually lost market share. By 2020, it held only about a 2 percent share of the global smartphone market.

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More importantly, LG’s smartphone business reported an operating loss of $750 million in 2020, which prompted the company to exit it completely. The business had accumulated losses of $4.5 billion in six years and ultimately LG had to pull the curtains on the perennially loss-making business.

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Which companies lead in the global smartphone market?

According to data from Counterpoint Research, Samsung is the biggest smartphone company globally and had a market share of 23 percent in the first quarter of 2022. Apple is a close second with an 18 percent share. Xiaomi, Oppo, and Vivo are the other leading smartphone companies with a market share of 12 percent, 9 percent, and 8 percent, respectively.

Notably, Samsung and Apple have increased their market share over the last year even though the top three Chinese smartphone companies have lost market share over the period.

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LG isn't going out of business.

While LG exited the smartphone market and existing users are complaining about error messages, the company isn't going out of business anytime soon. By exiting the smartphone business, LG is focusing on its other profitable businesses.

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LG reported revenues of 74,722 billion South Korean won in 2021, which was 28.7 percent higher than the previous year. The company is sustainably profitable and has a reasonably strong balance sheet. The company has a credit rating of BBB with a positive outlook from the S&P 500, which is an investment-grade credit rating.

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LG is also paying dividends, another sign of healthy financials. The company distributed 14.9 percent of its net income in 2021, which was its 20th annual dividend. However, the yield was a paltry 0.6 percent.

How can you invest in LG stock?

LG stock doesn't trade on the U.S. stock markets. Its primary listing is in South Korea but its Global Depository Receipt trades on the London Stock Exchange. If your broker lets you trade in foreign stocks, you can invest in LG stock.

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