A year after LG left the smartphone industry, Samsung is the big winner

Just over a year ago, LG announced that they were leaving the smartphone industry. This was not a completely surprising move, as the company’s mobile division had suffered heavy losses for years. Still, it left a significant void in the U.S. smartphone market, especially in the prepaid device area, where LG had a strong presence.

This new position provided an exciting opportunity for another Android device maker to fill the void – perhaps OnePlus, which had recently started bringing budget phones to the US. Or maybe another Chinese brand like Xiaomi can finally gain a foothold in the US.

The obvious answer, Samsung, turned out not to be a challenger. Samsung is already the second largest smartphone brand in the US, and its A-Series phones have been the big winners in LG’s absence. According to Counterpoint Research, Samsung’s A-Series phones contributed to its 11 percent year-on-year sales growth in the 4th quarter of 2021. It notes that the Galaxy A12 was the best-selling Android device in the US in 2021, and that the Galaxy A32 5G was a strong seller at Metro by T-Mobile, the country’s largest prepaid brand.

It has not been a complete landslide; Motorola picked up some upcoming LG customers, and OnePlus got some traction. But the smartphone market in the US was a two-party system long before LG left the place, and it’s even more one with LG gone.

As we declare a winner, let’s be aware of who the loser is and that’s for sure does not LG. Perennial technology analyst Avi Greengart can see it despite his feelings about covering the company’s mobile division. “They were exciting to cover, but the bottom line is that LG’s phone division lost hundreds of millions of dollars a year and had no clear path to profitability. LG as a conglomerate has lots of profitable products and product lines. The cold, hard logic of cutting this loose, it makes sense. “

LG is fine. We, the people who buy smartphones and now have fewer choices on our store shelves, are the ones who lost. We have one less option when it’s time to choose a new phone, and one less reason to deviate from Apple and Samsung, the dominant brands in the US smartphone market.

Photo by Allison Johnson / The Verge

What made Samsung such a good candidate to fill LG’s vacancy? Strong brand recognition, for one. Jeff Moore, an analyst at Wave7 Research, says this is especially important in prepaid. “As a general rule, if you switch to a prepaid provider, from another prepaid provider, you will choose the most expensive free phone. And the brand name is a big help to that. So it gives a huge tailwind to Samsung when people switch from one provider to another. “

Samsung was also in a good logistical position. The company already has strong relationships with US wireless companies. Without them, it is very difficult to sell smartphones in the United States. The company also had units at the right price points ready with no less than five A-Series units in its 2021 budget phone portfolio.

And then there’s the fact that Samsung’s A-Series phones are just fine. More often than not, they are the best option for any price point below $ 500. Samsung has also made important improvements on the software side. It offers the longest security support policy among Android phones sold in the US, with some A-Series models getting up to five years of security updates. It has also worked to get major OS version upgrades to older devices faster. Example: last year’s A32 5G is starting to get Android 12, although new devices from other manufacturers still come with Android 11.

As Greengart points out, the company also has the benefit of getting paid more than once when selling a phone. “Samsung uses its own monitors, its own semiconductors in some cases, and its own memory chips. So adding volume hits the bottom line not only on the sale of the phone, but also on the sales of the components.”

No doubt Samsung had the incentives and the right pieces in the puzzle to go after LG’s abandoned market share, a strategy that has paid off. Counterpoint reporting shows that in the fourth quarter of 2020, Samsung owned 16 percent market share in the United States. In the 4th quarter of 2021, that figure was up 22 percent. In January 2022, the Galaxy A32 5G was the fifth best-selling phone in the United States – behind four iPhone models. If anything, Samsung has underperformed thanks to problems keeping its products in stock. Counterpoint notes that in the 2nd quarter of 2021, “shortages, especially for A-Series devices, stifled Samsung’s growth potential somewhat.”

Photo by Allison Johnson / The Verge

Motorola’s gains were also significant. Before LG left the space, Motorola had about 5 percent market share in the United States. After Q1 2021, it rose to about 10 percent. (Counterpoint maintains it at a 12 percent share in the 4th quarter of 2021, a big jump from 3 percent in the same period of 2020.) In particular, the Moto G Pure helped, and it stands out as a very good unit at under- $ 200 category. It has been enough to drive it to No. 3 in market share – but it is a distant third place after Samsung, lagging by 10 or 20 percentage points depending on the quarter.

If Samsung and to a lesser extent Motorola were able to fill the void left by LG so quickly, are we really missing much with its absence? Both Greengart and Moore think so. Greengart also points to LG’s willingness to innovate and mentions that the company was the first to put five cameras on a smartphone and the first to take the ultra-wide camera as a complement to the primary rear camera. “We lose something when companies that have tried different things leave the market,” he says.

He also notes that LG phones were also frequently set up, making them an appealing Samsung alternative. “LG always priced its phones similar to Samsung. Then they dropped in price very quickly because they were not so good. It opened up a kind of trade: a phone that is almost as good as Samsung for much less money … and [now] that phone is not available. “

LG left some room for movement in the prepaid space, but overall, the US is undeniably dominated by two brands: Apple and Samsung. It’s hard to imagine it changing anytime soon. Even such a recognizable brand as Google has not been able to put a dent in the duopoly. Moore cites Pixel 6 as a case study of what happens when a challenger puts all the pieces together and really goes for some of that market share. “We got very, very low percentages for Google Pixel despite having a complete ad flash, a good, well-known brand, and availability on all providers.” It’s hard to imagine a brand with a more well-known name than Google, and yet Pixel remains a cult favorite.

Moore sums up the whole market situation and comments on speculation that OnePlus could handle the duopoly. “There had been some hope that they might be able to make it a three-way game … but they’re still in the low-to-mid single digits, and it’s not really a game.”

Samsung did not take all the market share that LG left behind, but they won enough to consolidate an already invincible lead. Play, set, match.