LG Electronics reported that it shipped a record number of smartphones in the fourth quarter, but the company's mobile unit still posted a loss in the period due to higher marketing expenses and intensified price competition in the market.
The South Korean electronics conglomerate posted smartphone sales of 13.2 million in the period, up 9 percent from 12 million in the third quarter and up 54 percent from 8.6 million in the year-ago period.
Overall, sales in LG's mobile communications unit were up 28 percent year-over-year and up 18 percent from the third quarter, rising to $3.32 billion. The company said LTE smartphone sales jumped by 110 percent from the year-ago quarter, thanks to sales of phones like the Nexus 5 and G2. LG also said that, although 3G phone sales increased by 34 percent year-over-year, they declined from the third quarter "due to accelerated transition from 3G to LTE and to intensified competition in the market." LG spokesman Ken Hong said the company shipped a total of 18.7 million handsets--smartphones and non-smartphones--in the fourth quarter of 2013, up from 18.3 million in the third quarter and 15.4 million in the fourth quarter of 2012.
Source: LG
However, as the Wall Street Journal noted, LG's mobile division swung to an operating loss of around $40.1 million, compared with an operating profit of $52.3 million a year earlier. The mobile division is LG's second-largest business in terms of sales.
LG said it enjoyed a better mix of products in the quarter, but that its results were dragged down by expensive marketing campaigns and increased competition from the likes of Apple (NASDAQ:AAPL) and Samsung Electronics and Chinese competitors Huawei, ZTE and Lenovo.
LG probably spent around $185 million on marketing in the fourth quarter, Greg Roh, an analyst at HMC Investment Securities Co. in Seoul, told Bloomberg.
"Overall market competition will intensify due to diversifying consumer needs and intensifying price competition as a result of the expansion of mass market phones," LG said in a statement. The company expects the smartphone market--LTE phones specifically--to continue to grow.
In the U.S. market, AT&T Mobility (NYSE:T), Sprint (NYSE:S) and T-Mobile US (NYSE:TMUS) have said they will launch LG's G Flex curved smartphone, giving one of LG's flagship products a boost. AT&T and Sprint have said they will sell the phone for $299.99 with a two-year contract, while T-Mobile said the device will go for $0 down with 24 equal monthly device payments of $28.
"We think it would be difficult for LG to generate meaningful profit from its smartphone business in the near-term," James Kim, an analyst with Nomura, wrote in a recent research note, according to the Journal. "Price competition among industry leaders will hurt the rest of players...driving them into more losses."
For more:
- see this release
- see this LG presentation (PDF)
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Re/code article
- see this CNET article
Special Report: Wireless in the fourth quarter of 2013
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Article updated Jan. 28 with a figures for LG's total handset shipments in the fourth quarter of 2013.