Models show the latest version of LG Electronics’ Optimus smartphones at an event in Seoul in October. The Korean tech giant has been paying the price for falling behind rivals such as Samsung Electronics and Apple in high-margin products like smartphones and touch-screen tablets. / Korea Times file

LG hopes chip giant will help reduce smartphone gap with Samsung, Apple

By Kim Yoo-chul

LG Electronics will manufacture U.S. chip giant Intel’s first smartphones running on Google’s Android mobile software, that are set to be exhibited in an upcoming technology fair in the United States, officials from both companies said Friday.

The alliance is seen as positive for LG although some raise doubts on the viability of the partnership as Intel has no history in the competitive phone business.

``LG Electronics will produce Intel’s first Android smartphones that use Intel’s own mobile platform. The device will be shown at the CES,’’ said a top-ranking executive, Friday.

When contacted, however, spokespeople declined to officially confirm this.

CES, or the Consumer Electronics Show, is an annual technology exhibition that will kick off on Jan. 9, 2012 at the Las Vegas Convention Center (LVCC).

Intel has long been an also-ran in the mobile device field as their mobile-focused Atom chips have drawn too much power for portable gadgets smaller than a netbook.

``But one clear point is that Intel is spending heavily for more efficient mobile chips for phones and tablets,’’ said the executive.

LG Electronics previously introduced a smartphone using Intel’s mobile platform at last year’s CES but the alliance failed without yielding significant returns the two scrapped commercializing the phone, citing a lack of marketability.

``Intel’s chief executive Paul Otellini will release Intel’s first Android smartphone using our own platform at the CES,’’ said Intel Korea chief Lee Hee-sung.

Lee’s confirmation of the announcement is regarded as ``very rare,’’ as the company tends to be tight-lipped on any crucial issues.

``Personally, I doubt that LG Electronics will release phones running on Android software based on any Intel platform. It’s quite possible for LG to push Intel’s reference mobiles but with huge subsidies from Intel for promotion,’’ said another LG executive, asking not to be identified.

He added that the Intel phone will be on shelves from March at the earliest.

Intel has plans to strengthen the marketing of phones and tablets equipped with its latest mobile chip dubbed Medfield and running on Android by Google.

Heavy dependence on Intel

But the partnership has been raising concerns over LG’s heavy dependence on Intel. Almost all LG Electronics’ notebooks use Intel chips, according to officials.

Intel routinely offers money to manufacturers in the form of cooperative advertising, the officials said.

Instead of paying companies to build hardware, Intel offers advertising funds, thereby avoiding the antitrust watchdog’s ire over anticompetitive behavior.

LG’s growing dependence on Intel was confirmed again after LG joined forces with the chipmaker to promote its wireless display or WiDi technology.

WiDi made by Intel will be embedded in LG’s Cinema 3D Smart TVs from this year. It will allow users to wirelessly steam high definition content from devices such as a laptop to larger screens like a television.

``For Intel, LG’s support is looking good amid the rising market share of rival Advanced Micro Devices (AMD) in Korea,’’ said an LG executive.

``Intel is getting nervous over the growing emergence of AMD, therefore, the partnership with LG will be good for the chipmaker,’’ he said.

AMD’s Korean branch more than doubled its revenue last year from the previous year because LG’s rival Samsung expanded its notebook lineup using AMD’s CPU.

Data from IDC, a market research firm, said AMD had 7 percent of the Korean market as of the end of November, up from 4 percent in 2010.

``Intel is giving out more money to cash-strapped LG Electronics in return for a closer partnership. I still have doubts about the marketability of the upcoming Intel Android phone,’’ said an industry watcher.

Korea’s Fair Trade Commission (FTC) fined Intel 26.6 billion won over violations of antitrust rules, here.

The FTC ruled that Intel illegally used hidden rebates to squeeze rivals out of the marketplace for CPUs, saying that the firm harmed Korean consumers by deliberately acting to keep competitors out of the computer chips market for many years.