LG trying hard to fill smartphone gap

Electronics giant planning to unveil 20 models

By Kim Yoo-chul
Staff reporter

LG Electronics CEO Nam Yong was deemed an agent of change promising to bring a razor sharp, Samsung-like competitive edge to the conglomerate.

Nam’s promise is still hanging on but barely considering the firm’s current dismal performance. This month, the LG CEO has another chance to convince his boss Koo Bon-moo, the LG chairman, that his way is the right way.

Koo is expected to conduct an overall review of his conglomerate this month.

Koo retained Nam to keep his post, asking him to strengthen the existing business portfolios and find new growth engines. That was late last year.

So far, the 61-year-old CEO, who had worked as secretary to Koo Ja-kyong, Bon-moo’s father, is obviously trying but is falling short in positive results.

It is a matter of course that this doesn’t mean Nam’s job is in jeopardy, considering LG’s tradition of not easily firing its employees. But the writing appears to be on the wall.

Stocks of LG Electronics were underperforming, compared to the nation’s benchmark index KOSPI. LG is lagging behind its overseas rivals even in ``next cash-cows’’ such as the rapidly growing smartphone and 3D television businesses.

Nam was rarely spotted at LG’s headquarters after he participated in an industry forum in mid-April, LG officials say.

This makes industry watchers pay extra attention on how Chairman Koo is going to move.

“Chairman Koo is a laissez-faire boss, giving a great deal of discretion to his subordinates. But Koo, like any other boss, still keeps a close tab on the bottom line,” an LG executive said.

Koo is listening to updated strategies from all the top-level executives. LG International will be first and LG Electronics will report to Koo in the third week of this month, Jerry Kim a company spokesman said.

Earlier, Nam said the electronics unit will focus on the keyword ``openness’’ as LG Electronics has to exhibit less restriction at a time when the industrial paradigm is drastically changing because of technology convergence and innovation.

Accordingly, LG has identified its future growth engines and committed to invest in areas such as solar power and commercial air conditioners. LG also said it would continue to develop its core businesses including mobile phones and televisions

One of the key tasks facing Nam is to revive the lagging momentum of its smartphone business, analysts and watchers say.

On top of that, LG is being called on to improve technological developments in its stronghold of home appliances such as 3D TV.

Recently, LG was getting in trouble over safety glitches with its drum washers. In Australia, its excessive marketing schemes to sell energy-efficient refrigerators to regional consumers cost them.

Months ago, LG dropped its plan to export 15,000 units of its 3D TVs to the U.K. and its INFINIA-branded 3D televisions are showing meager results.

But the real problem lies in its smartphone competitiveness. Mobile business takes up 45 percent of LG Electronics’ annual sales but its smartphone business lacks the ingenuity of Apple’s iPhone and aggressiveness of Samsung’s Galaxy.

Operating profit rates for LG’s mobile communication unit, dropped to 0.9 percent in the first three months of 2010 from 6.7 percent a year ago, LG said in a regulatory filing.

LG said it was planning to launch 20 sets of smartphones that are based on Google-powered Android mobile platforms by the end of this year.

Its chief financial officer has admitted that LG needs ``some more time’’ for a turnaround in its smartphone department, citing the lack of preparedness.

Officials say the second quarter would be fair for the home appliances and television divisions, while its handset division will see another ``disappointing quarter.’’

``The smartphone sector is a significant business that LG should not lose as such devices could create new mobile eco-systems, giving more room for handset makers to seek future revenue sources. LG needs consistency towards that segment,’’ another industry watcher said.

LG has already shipped some of its smartphones to the United States via Verizon Wireless. The company has also been in talks with several mobile carriers in the Middle East region to introduce more Android phones, though Kim of LG was mum.

``LG should turn itself into a fast mover, rather than remaining as a fast follower, with more advanced technologies instead of just focusing on marketing and organizational changes,’’ said Chung Seung-hoon, an analyst at Eugene Investment.