LG bounces back in Q2 with record 14.5M smartphone shipments, driven by G3

LG Electronics reported a return to growth in its mobile unit in the second quarter after a string of financial losses. The company posted a new record in terms of smartphone shipments for the period thanks in large part to the launch of its latest flagship device, the G3.

Overall, LG reported second-quarter net profit of around $400 million on total revenue of $14.92 billion, up 7.7 percent year-over-year.

LG, which makes everything from TVs to refrigerators, said sales in its mobile communications business increased 16 percent from the year-ago period to $3.51 billion, the highest sales figure for the division since the first quarter of 2010. The mobile unit posted an operating profit of $83.4 million, a reversal of three consecutive quarters of losses.

Source: LG's earnings presentation.

"We don't expect (mobile) profit to turn negative like last year," LG CFO David Jung said during the company's earnings conference call, according to Reuters. "We expect further improvement."

LG shipped 19 million total handsets (smartphones and feature phones) during the quarter, up from 16.2 million in the year-ago quarter. The company's 14.5 million smartphone shipments were up 20 percent year-over-year and up 18 percent from the first quarter's 12.3 million.

The company said much of its smartphone success was due to the initial launch of the G3 in the South Korean market and strong sales of its mid-range L Series smartphones. The G3 first went on sale in May. LG noted that it plans to continue its global rollout of the G3 and introduce more mass-market products in the second half of the year, including variants of the G3, such as the recently announced G3 Beat, as well as more L Series models.

In the U.S., Verizon Wireless (NYSE: VZ), AT&T Mobility (NYSE: T), Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) are selling the G3 at various price points, but sales only started within the past week or two. Verizon, for instance, is selling the G3 for $99 with a two-year contract, $30 per month with its Edge handset upgrade program or $600 at full retail pricing. Other carriers are offering similar pricing.

The G3 sports key improvements in screen technology, the phone's camera and overall design and user interface. However, it went on sale more than two months after rivals Samsung Electronics and HTC released their own 2014 flagship phones. LG executives have said they are beefing up their marketing for the G3 to make sure it has a strong impact on the market.

In a presentation accompanying its second-quarter results, LG said it increased LTE phone sales 123 percent year-over-year and 4 percent from the first quarter thanks to the launch of G3 and new models in the mass-market segment. Interestingly, LG also said that total shipments in North America increased by 39 percent from the first quarter due to the stronger sales of its G-Series and L-Series phones.

Looking ahead at the overall market outlook, LG said that it expects the smartphone market to grow continuously, especially for LTE phones. However, it acknowledged that "market competition will be intensified due to continuous launch of new models in premium segment and intensifying price competition as a result of the sales expansion from the mass market."

For more:
- see this release
- see this LG presentation (PDF)
- see this Reuters article 
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this NYT article

Special Report: Wireless in the second quarter of 2014

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Article updated July 25 with information on LG's total handset shipments for the second quarter of 2014.