LG eyes lost ground in smartphones - Financial Times

As Samsung Electronics has surged to pole position in global smartphone sales over the past two years, its South Korean rival LG Electronics has watched its handset market share dwindle. But a positive reception for its newest flagship handsets is spurring hopes that LG might regain some of the ground lost in recent years. Company insiders admit that the group was damagingly slow to recognise the smartphone's emergence as the new growth driver in the mobile phone industry. While Samsung's feverish work on the Galaxy series enabled it to overtake Apple in global smartphone sales in 2011, LG's early smartphones won a tepid response from critics and customers. Its share of the world mobile phone market fell from 8.6 per cent in 2010 to 3.6 per cent last year, according to Strategy Analytics, a consultancy. However, the company says it is encouraged by early sales of the Optimus G, a high-end smartphone launched in September, which won admiring reviews from analysts and shipped 1m units before the end of last year. "The success of the Optimus G has bolstered confidence in our organisation," says Park Jong-seok, head of LG's mobile division. "Our latest LTE-equipped smartphones are global top-class products." The success of the Optimus G helped LG to overtake Apple to claim second place in the US mobile phone market in December. Even before the launch of the new flagship, stronger sales of other handsets helped LG's handset division to end a string of losses with a slim operating profit of $19.8m in the third quarter. Last week the Optimus G Pro, featuring an improved screen and camera, went on sale in South Korea, and it will be rolled out in other countries in the next few months. However, LG is seeking growth in a market where overall expansion appears to be slowing. Last month, Samsung warned investors that the smartphone industry's "furious growth spurt" in 2012 would be "pacified" this year, as demand eases in increasingly saturated developed markets. LG says it will respond by seeking to boost sales of lower-end smartphones in developing countries. While this strategy could weigh on margins, the group says it will help to boost its smartphone sales this year by more than 50 per cent to about 40m units. "We are still very hungry for growth. We will try to increase volume first by tackling every segment of the market through a broader product portfolio," Mr Park says. LG wants its low-end and mid-range devices to account for 60 per cent of smartphone shipments this year, up from about 40 per cent last year. It points to strong uptake of its cheaper, 3G-enabled Optimus L-series smartphones, of which it has sold 15m since the launch last March. It expects a further burst of growth from the launch in the second quarter of inexpensive phones equipped to work with high-speed LTE wireless networks. But analysts say it will not be easy for LG to strengthen its presence in the low-to-mid-end market, as it faces intensifying competition from lower-cost Chinese players such as Huawei and Lenovo. This is a particular problem in China, where LG does not even rank among the top five smartphone makers, according to several consultancies. Meanwhile, at the high end, LG argues that its strength in display technology – it is the world's second-biggest television manufacturer – will give it an edge in an area that is increasingly important as consumers favour larger screens. But while analysts acknowledge LG's abilities in design and technology, they warn that it could prove tough to match the brand power of Samsung and Apple, which dominate the top end of the market. "Its smartphone quality has improved, compared with other second-tier rivals, but it still has a long way to go to catch up with bigger players in terms of volume and brand value," says Greg Roh at HMC Securities. He predicts that slowing demand in advanced markets will lead to higher marketing costs for smartphone makers, reducing their profit margins. "In order to offset increasing marketing costs, they need to come up with a compelling product in the high-end market. Otherwise, it will be difficult to sustain profits." LG's absence from the fast-growing tablet market also bodes ill for the company's future. Mr Park says the company is still considering when and how to enter the tablet market, while Samsung has more than doubled its tablet market share to 15 per cent in the fourth quarter, challenging market leader Apple with a 44 per cent market share. "It is not difficult to switch the smartphone technology to tablets but I am not sure whether we can make a profit by entering the market," says Mr Park. Copyright The Financial Times Limited 2013. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web. via Technology - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNHz23Bnlagm5peLhGOKAttNs1f_CQ&url=http://www.ft.com/cms/s/0/4ed147e0-7ccf-11e2-adb6-00144feabdc0.html

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