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LG was the third largest phone maker in the world. They were selling around 120 million phones a year. But, in 2021 after 23 consecutive quarters of no profit, and losing $4.5 billion, LG left mobile altogether. A year after they had proudly said "LG's mobile business is going to be profitable by 2021". LG is the strangest phone company in the entire industry, because despite these losses, it might also be the most important phone company. So many crucial parts of your current phone were first pioneered by LG. The two rear cameras, quad-core, ultra-wide camera - all were first done by LG. Even a modular phone, an extendable screen,
and a "T" shaped phone. They even had a no-stylus touchscreen before Apple. LG was the most innovative smartphone company, by far. So why did it fail so badly? Well, as it turns out, LG kept making the same three mistakes over and over. The crazy part about all this is how popular LG phones were back in the day. In the 2000s, LG was actually dominating, and their phones were really popular and… really good? I bet there are a bunch of you watching whose first or second phone was the Voyager or the LG Chocolate. These were pretty awesome, and back then, LG was making a lot of breakthroughs. In 2006, LG announced the Prada. The first
capacitive touchscreen smartphone, no stylus required. Months before the iPhone reveal. In fact, LG actually believed Apple stole the idea from the Prada. [Woo-Young Kwak, head of LG Mobile Handset R&D Centre]: "We consider that Apple copied the Prada phone after the design was unveiled when it was presented in the iF Design Award and won the prize in September 2006." But this is just the tip of the iceberg. The LG Optimus 2X, the first dual-core phone, and the first to have 1080p video. The Optimus 3D, the first to have two rear cameras.
The Optimus 4X, the first quad-core phone. The first QHD display with the LG G3. The G5 with the first ultra-wide camera. The V40, the first with three rear cameras. And there are even more than I mentioned here. LG was on a roll, and many of these became standard in all other major phone brands. By 2008, LG was the third-largest mobile phone manufacturer in the world. They were selling around 120 million phones a year. Then came the G series, their most popular phone. But pretty quickly, LG phones were selling worse and worse. Why? Well, with how groundbreaking a lot of LG phones were, they came with some drawbacks.
LG was hardware-first, which was the first of LG's big mistakes. Groundbreaking, trendsetting. New technology often comes with drawbacks. For one, not all ideas were a hit. The LG Optimus 3D was also the world's first mobile with a glasses-free 3D display. Not as influential as the two rear cameras. Or the LG G Flex - a curved screen, and a self-healing back. The G4 had a leather back and a curved display. But it suffered from a boot loop which made it unusable. The G5 was a modular smartphone.
Cool idea! But they abandoned it soon after. There was also the G8 ThinQ, which had a hand recognition sensor, so you could control your phone without touching it! Which uh, didn't really work most of the time. They quickly abandoned that too. You can probably see the problem. LG was getting a bit carried away with new ideas. Even if LG was first most of the time, why would you buy into a new cool idea when so many of them were killed right away? Also, because of all the new features and ideas, these phones cost far more due to R&D. Q3 2016 had a mobile loss of $389.4M, with revenue down 23%.
Despite selling 55 million phones. For context, Samsung at this time recorded its best quarter in years. If not for mobile, LG's overall operating profit that quarter would have been $650 million instead of $252 million. The phone business was destroying the company. After the 2000s, LG's market share had collapsed. And it wasn't just them. Sony had basically disappeared, same with Nokia and Blackberry. They shipped around 56 million phones in 2017, then 39 million in 2018, and then 33 million in 2019. LG needed to change, and drastically. Either drop mobile, or dramatically improve profits. The latter would be a big
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And he made a very bold proclamation. [Kwon Bong-seok, LG CEO]: "LG Electronics' mobile business is going to be profitable by 2021." And for context, this was the CEO of the entirety of LG, not just the head of mobile. Clearly, LG wanted mobile to work. But the writing was on the wall. The last time they had any profit was Q2 2015. So, what was the plan? [Kwon Bong-seok]: "I can say we can make that happen as LG Electronics will expand our mobile lineup and steadily release new ones attached with some wow factors to woo consumers." But this right here was actually Kwon, and LG's, second big mistake.
Not the profitable part, but the "wow factors". You might be able to tell what LG was going to do. But before we get to that, we need a bit more context. LG's broader strategy was a bit weird. It was essentially a paradox - extreme innovation, but also cheap phones? Priced around cheaper Samsungs and Huawei. But LG did have a stroke of luck. With new sanctions against a huge competitor - particularly one at the cheaper price point - LG's prices would seem more competitive. That demand for that price range had to go somewhere. So, less Huawei, more room for LG. So LG got to work,
with a focus on "wooing" customers. And what came next really was impressive. The LG Velvet, for example - a mid-range smartphone - had a dual-screen case. A separate physical second display you could clip onto the phone. This was… actually really cool. It was basically like the large new flip phones we have today, but in 2020. It was sort of like a Nintendo DS! And that was just the beginning. Then came the LG Wing, a phone with a second screen on a mechanical swivel that rotated out into a T-shape. Just imagine being a case designer for this thing. Then, in January 2021, LG revealed the Rollable.
A phone with an extendable display. Extremely cool! LG was showing off some of the most innovative phones people had ever seen. But here's where the problems start. First, we see more of the earlier problems: commitment. Even eight months after launching the Wing, people were still waiting on an update to Android 11. By this point it was still on Android 10, despite a promise from LG to upgrade it to 11 through 13. They also "silently switched to bi-monthly security patch updates".
It was hard to buy into these cool new phones when it felt like LG would drop them and move on to the next cool idea. "The LG Wing feels like abandonware at this point, with LG affording the device awful software support." But LG had another problem. And we see a symptom of this very clearly in LG's flagship. Snapdragon 865, 5G, great audio recording, octa-core, 64-megapixel dual camera. It had a lot of the same specs as the Galaxy S20, and was over $100 cheaper. But its name was the LG V60 ThinQ 5G. Though to be honest, Samsung isn't the best at this either. There's the Note, the A, the J, and the M, each supposedly targeting a different customer.
There's also the Z now, which I think is the foldable one? But at least their core lineup is well named: Galaxy S26 or S26 Plus, named after the year. LG, what are we doing here? And if you thought Samsung's names were a bit annoying, just look at the rest of LG's lineup. I think they might have used every letter of the alphabet. And this was part of the second big mistake LG kept making. They weren't good at marketing. LG and Kwon wanted to "woo" customers - a nice idea. And their phones definitely did that, but only with hardware.
They couldn't actually sell these things. You have to remember, LG had basically disappeared from the minds of most customers. They had fallen to roughly 2% global smartphone share and shipped only 23 million phones that year, versus 256 million for Samsung. Many of their marketing campaigns and advertisements were sort of… functional? They lacked the boldness that Apple and Samsung had. This might sound weird, but LG felt like the engineers who designed the phone were also in charge of naming it and marketing it. Some of you might go "that's exactly what I want".
But it meant LG struggled to read wider markets. Even with cool features, they couldn't grab people's attention. I think if LG had spent a bit less on innovation and instead hired a really killer marketing VP, things would have been very different. They might have at least had some good names. But that was only two of the three mistakes LG made. These crazy new phones might have even worked, if they hadn't made the third mistake. We just passed 900,000 subscribers, and I just want to say thank you all so much.
This ride has been awesome, and we're almost at 1 million now! Many phone companies - and tech in general - typically have two types of products. The first are the ones LG loved to make: the crazy ideas, things people had never seen before. And the second, which LG lacked: the cash cow. Your mass-market, solid phone, which importantly had good margins. You might say "okay… phones should make money." But these two actually have an important relationship. Even if innovative phones lose millions, that's okay - because the cash cow funds them. For example, the Galaxy S24 sold 37 million units in 2024, and the Galaxy
Z - the foldable - sold just 5.2 million. They likely made a loss due to big R&D costs, but that's okay, because the cash cow makes enough profit to cover those losses, so eventually, the more innovative one will make profit. These new ideas get iterated on, refined, and some make it to the mass market. LG didn't really have this dynamic. The LG V60 ThinQ 5G sold just 300,000 units globally. In reality, it was the rest of LG keeping the entire mobile division alive. Not good. By this point, it was too late. In January 2021, Kwon was sending internal messages to staff suggesting LG was looking at closing their mobile business. For context, less than a month earlier,
LG was showing off the Rollable. LG's smartphones had now recorded losses for 23 consecutive quarters, the last profitable one being Q2 2015. The total loss was $4.5 billion across six years. The division was also only bringing in 7% of total revenue, so it was dragging everything else down without contributing much. So on April 5th, 2021, LG announced that it was closing its mobile business unit. [Ko Eui-young, analyst, Hi Investment & Securities]: "In the United States, LG targeted mid-priced - if not ultra-low - models, and that means Samsung, which has more mid-priced product lines than Apple, will be better able to attract LG users."
But after the announcement, something interesting happened. Their share price surged 12 percent. [Koh Jeong-woo, analyst at NH Investment & Securities]: "Investors now have a clearer sense of the fate of the smartphone business. We are not living in a time where every smartphone maker grows and makes money. LG failed to turn it around with the release of its highly anticipated LG Wing and couldn't benefit from U.S. sanctions against Huawei." Even with those big sanctions and restrictions, LG phones were already dying, had very little consumer pull, and people likely went to Xiaomi and Oppo instead, or the cheaper Samsung brands.
I will note, though, a lot of consumers were pretty sad about this. "LG were never perfect but in a world of boring slabs they delivered some of the most unique phone designs, ideas and features ever. Time to pour one out." "LG has some of the best audio hardware of any phone. It's a shame that LG is withdrawing." And I feel the same way. The once third-biggest, and one of the most important phone brands, was dead. This probably meant more of the same, and less innovation. But, as much as I wish LG phones were still around today, they made the right business decision. LG phones were dragging the entire company down, so it was better to cut losses.
The worst case would have been pouring billions more into R&D because of the sunk cost fallacy, making things even worse, and potentially ruining the entire company. Interestingly, Kwon Bong-seok was actually promoted to Vice-Chairman some time after this. But what makes all of this even crazier is that while their phone division was dying, LG was making an even bigger gamble - in TVs, specifically with OLED. They were about 10 times as expensive, and as many as half the panels coming off production were faulty. Everyone had abandoned OLED… except LG. And that decision changed the industry forever. Click here to learn the rest of the story.
