LG Electronics' smartphone business withdrawal and sale are becoming more visible.
BBK surges despite Huawei phone shipments plummeting 41%
Samsung Electronics and Apple Launch Full-Scale 5G Competition


The global smartphone market has been in turmoil since the beginning of the new year.

LG Electronics' withdrawal from the smartphone business, the growing risk to Huawei due to US sanctions, the advancement of Chinese companies affiliated with BBK, including Oppo, Vivo, and Realme, and the 5G smartphone competition between Samsung Electronics and Apple are emerging as hot topics.

◇ LG Electronics' MC Division seeks to end its long history of glory and shame.

On the morning of January 20th, several media outlets reported that LG Electronics was considering restructuring its Mobile Communications (MC) division, which oversees its smartphone business. In the afternoon, LG Electronics CEO Kwon Bong-seok acknowledged the possibility of a sale, stating, "We are reviewing the direction of our business operations with all options open."

In the early to mid-2000s, LG Electronics stood out in the mobile phone market with feature phones such as the 'Chocolate Phone,' 'Shine Phone,' and 'Prada Phone.' However, it entered the smartphone market relatively late compared to competitors such as Samsung Electronics and has remained at a disadvantage to this day.

LG Electronics' MC division recorded operating losses for 23 consecutive quarters from the second quarter of 2015 to the fourth quarter of 2020, and the accumulated operating loss is estimated to have reached 5 trillion won by the end of 2020. Despite its continued deficit streak, LG Electronics focused on self-rescue measures in 2019, including suspending domestic production, relocating its factory to Vietnam, and increasing the ratio of original design manufacturing (ODM) products. The company also focused on improving its business structure and reducing costs.

However, LG failed to establish a presence in the premium market, overshadowed by Apple and Samsung Electronics, and struggled in the mid- to low-end market, falling behind Chinese rivals like Huawei and Xiaomi. Last year, LG attempted to revamp its lineup with the introduction of the so-called mass premium phone, the "LG Velvet," and introduced new form factors like the "LG Wing," a dual-screen phone in a T-shape, but the market response was lukewarm.

LG Electronics plans to release the 'LG Rollable' phone, which was briefly unveiled at CES 2021, as early as the first quarter of this year or at the latest in the first half of the year, but the development of other strategic phones after that is observed to be unclear.

Various scenarios have emerged in the market, including a spin-off sale of LG Electronics' MC division, a drastic reduction in operations, and a merger with other divisions. Currently, it is understood that companies such as Google in the US, Volkswagen in Germany, and VinSmart in Vietnam have expressed interest in acquisition.

Huawei smartphone shipments plummet 41%, but BBK surges.

According to Counterpoint Research, Huawei's global smartphone shipments in the fourth quarter of 2020 were 33 million units, a 41% decrease from the same period last year, and its market share was only 8%.

Huawei fell from the world's number one to sixth place, falling behind Samsung Electronics, Apple, and Chinese competitors Xiaomi, Oppo, and Vivo. It is analyzed that the US sanctions have caused a major blow to Korea, as not only has the use of the Android OS been banned, but it has also made it impossible to purchase semiconductors produced with US technology.

Last November, Huawei sold its mid- to low-priced smartphone brand Honor to Shenzhen-based Zhixin New Information Technology, a move aimed at restructuring its business and focusing on recovering its smartphone business.

There have been reports that Huawei is considering selling its premium smartphone brands, the 'P' series and 'Mate' series, but Huawei has denied this.

Meanwhile, the 2020 shipments of three smartphone companies under the Chinese BBK Group, including Oppo, Vivo, and Realme, surpassed Samsung Electronics (255.7 million units) by 262.7 million units.

Oppo and Vivo have laid the foundation for growth by targeting niche markets in China's provincial cities. Since then, Oppo has pursued a dual strategy of targeting the mid-to-low-end market for women, while Vivo has targeted the premium market for men, and this has led to the success we see today.

The three companies are expected to rapidly improve their technological capabilities, such as by preemptively adopting display-integrated fingerprint recognition and under-display cameras that place the front camera below the screen, and to quickly catch up with Samsung Electronics and Apple in the premium market.

Samsung Electronics and Apple fiercely compete for first place in the 5G smartphone market.

In the 2020 global smartphone market, Samsung Electronics maintained its lead with 255.7 million units shipped and a 19% market share. However, Apple's fierce pursuit in the second half of the year narrowed its lead. Samsung Electronics' overall smartphone shipments decreased 14% from 2019 (296.9 million units), resulting in a market share of just 19%. Apple, on the other hand, saw a 3% increase, resulting in a 15% market share. The gap between the two companies is now a mere 4 percentage points.

The battle for leadership is intensifying as competition from Chinese companies in the mid- to low-end market and Apple's launch and success of its 5G smartphone threaten Samsung Electronics' top spot. iPhone sales in the first quarter of fiscal year 2021 (October-December 2020) reached $65.6 billion (approximately 73 trillion won), up 17% from the same period last year, accounting for 59% of Apple's total revenue and the highest ever.

In January of this year, Samsung Electronics launched the Galaxy S21 series about a month early in 60 countries around the world, including North America, Europe, Southeast Asia, and India, including Korea, to compete with the iPhone 12 series. Furthermore, the company plans to strengthen its Galaxy Z Flip lineup, targeting the premium market with a budget-friendly foldable phone and increasing its market share with mid- to low-priced 5G smartphones.

Apple is also expected to aggressively expand its market share in the 5G market, leveraging the impact of the iPhone 12 series, and join the form factor revolution by developing foldable prototypes.

◇ The two-party system has resumed, and BBK must be on high alert.

With LG Electronics' exit becoming visible and Samsung Electronics and Apple solidifying their dominance in the global smartphone market, companies like Oppo, Vivo, and Realme are developing strategies to fill the void left by Huawei in China, the largest smartphone market.

Now, Samsung Electronics is the only domestic smartphone manufacturer left. As the company has maintained its leading position so far based on aggressive launches of low- to mid-priced products and its dominance in the Indian and Latin American markets, efforts are needed to maintain its leadership position.

As Chinese companies rapidly expand their influence by leveraging their large domestic market and competitive pricing, it is time to thoroughly prepare for future competition, including diversifying 5G lineups, offering mid- to low-priced products with premium performance, high-performance cameras, and leading the way in foldable technology.