Rethink: LG on smartphone offensive

LG Electronics aims to sell 6 million smartphones this year, and launch 15 Android models to help make up for its severe market lag behind key rivals like Samsung and HTC.
 
Some believes LG's target is ambitious - its recently announced Q2 results revealed very limited smartphone sales, and so there will be intense pressures on the second half of the year and new models planned for Android and Windows Phone 7.
 
An unnamed senior executive told Korea Times that LG would aim to sell 6 million high-end units this year. The vendor plans to shift its product mix away from the low-end feature phones that have boosted its volumes - but not margins – so far this year.
 
It will streamline this range even as it boosts its smartphone line-up, reducing the total number of phone models its sells from 145 last year to 70.
 
The altered mix will probably reduce the total number of handsets LG sells. In the first half of 2010 it shipped 57.7 million units, and its target for the year is 140 million. But its smartphone share is tiny and that helped put pressure on margins and deliver an operating loss in Q2.
 
Among the 70-strong handset portfolio, about one-third will be open OS smartphones by the end of 2010. LG will release 20 new models in this class during this year, 15 of them with Android and five with Windows Mobile or WP7.
 
The latter figure is lower than the dozen Windows devices LG had originally promised, though early 2011 will see it release a new series of WP7 phones plus offerings for Symbian^3 and then ^4.
 
 
The executive also said that LG has been in recent talks with major US and European carriers to get better uptake and stronger marketing support for LG's Optimus Android range.
 
Initial models made limited impact but LG is hoping for greater impact from the Optimus One, which will be released in 120 countries worldwide over the coming weeks (even more than Samsung's 110 for its Android big-hitter, Galaxy S).
 
LG is better known for CDMA and low-end handsets than for high-end offerings, and needs to turn around that image, with carriers and consumers, while trying to claw back the headstart lost to Android early movers like HTC and Motorola, as well as larger compatriot Samsung.
 
In Q2, LG reported an operating loss of KRW120 billion ($101.5m) in its handset division, reversing a year-ago gain of KRW620 billion. This was the first loss in this unit for four years and treble the size of analyst forecasts. Handset unit shipments rose by 2% to 30.6 million.
 
There are fears that, by entering late, LG will not get the margin boost it will target from smartphones. It could have missed the window when smartphones are regarded as premium products and will have to engage in a price war in which it will be outrun by the scale of Samsung and the promised onslaught of Nokia.
 
"One concern is that by the time the new line-up is all set up, smartphones may not provide the high margins they used to because of tougher competition," Yoon Hyuk Jin, an analyst at Shinyoung Securities in Seoul, told Bloomberg.
 

This article originally appeared in Rethink Wireless

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