LG, once the third largest mobile phone maker, has announced that it is exiting the business. This news is not surprising, they have been losing money for years, but it is a good opportunity to review where the smartphone business stands today.

In the early, 2G days, of mobile phones, there were three dominant phone companies – Nokia, Motorola and Ericsson. Those three were also the leaders of the business of providing mobile infrastructure. These companies essentially had cornered the market for mobile engineering. Then Qualcomm entered the business. At the time, everyone focused on the Standards War with Qualcomm promoting its CDMA technology, which 20 years ago was the hot topic in mobile. Less studied at the time was Qualcomm’s business model, and this turned out to be far more important. They provided chips for anyone who wanted to build a phone, they had cracked open the supply of mobile engineering talent. This meant companies did not need a mobile infrastructure business to compete in mobile phones. The biggest beneficiaries of this were Samsung and LG, and to a lesser degree a handful of Japanese electronics companies. Very quickly, the Korean companies broke into leading market share positions. Nokia remained dominant, but Ericsson and Motorola went into what become essentially a terminal decline.

Over time, Mediatek took Qualcomm’s playbook one step further, providing not just mobile chips, but entire designs for phones. This meant that any company with an electronics assembly line could build a phone. In less than a decade, the industry went from basically three vendors to hundreds. This was not sustainable, but it was fun. Companies competed on design – phones that looked like cars, phones that looked like cigarette lighters, phones that were cigarette lighters.

And then it was 2007, Apple entered the business and everything changed. The scarce resource was no longer mobile engineering or chips, it was software, and two companies controlled all of that – Apple and Google. The market quickly became bifurcated between those that could make money in the business and those that could not. For a while, the former was essentially one company, Apple who for a long time made more than 100% of the industry’s profits, almost everyone else was losing money.

Not surprisingly this led to rapid consolidation. Ericsson and Motorola sold off their mobile lines, to Sony and Lenovo respectively. More striking, but less scrutinized, was the rapid decline in the number of China’s phone makers, going from hundreds to a handful. The survivors were companies who had sufficient scale to eke out profitability.

Today, there are six phone makers left at scale: Apple, Samsung, Huawei, BBK, Xiaomi and Transsion. Apple remains unassailable with the best customers and the majority of industry profits. Samsung survives through scale and integration with other parts of the Samsung chaebol. Xiaomi has built a loyal following through some very solid marketing. Huawei had pulled far ahead, but its future now is not bright. Transsion is mostly a feature phone business, with solid inroads in Africa and now India. And then there’s BBK Group. As the LG news broke, we were struck by how many people think the handset market is still fragmented among a dozen vendors, most people who say that do not realize that a third of the top brands on the market today are owned by a single company, namely BBK. They own Vivo, Oppo, RealMe and OnePlus as well as a few other brands. Depending on who’s counting BBK is now the second or third largest handset vendor on the market. There are a couple of other brands still out there – notably the legacy business of the one-time leaders – HMD (the brand owner of Nokia), Sony (Ericsson) and Lenovo (Motorola), but their collective share is small.

What really strikes us from this list is that we are almost back to the point where we started. Take Huawei off the list because their status is so unclear, and take off Transsion because their smartphone share is tiny – and we are left with four companies. The industry that has radically altered our lives has almost the same market structure as it did twenty-five years ago, albeit with a different set of players.

Seen in this light, LG’s decision to finally throw in the towel is not surprising. And so we also have to wonder how much longer some of the other players are going to stick around. There are still a dozen or so small-scale brands who probably could have bought LG’s business but chose not to. And then there is Samsung, are they going to still be around in ten years? From what we can tell they are still profitable, but we have to imagine they asking themselves a lot of these questions.

And this begs the bigger question – are industry conditions going to change again? We speculated a few weeks ago about Google’s intentions towards Android and how that could shake things up. And there is still a big question about what will happen to Huawei’s brands. AR will be a big deal, but is still years away. In short, there seems to be no reason on the horizon for any of this to change. That being said, we imagine Ericsson thought the same thing in 1999, Motorola thought that in 2007, and Nokia in 2010. Seems like it is time for the industry to shift again soon.