Optimus, 3D TVs put LG on fast track out of slump
By Kim Yoo-chul
LG Electronics is increasing profit with its two critical pillars of 3D TVs and smartphones leading the way.
It has steadily been rolling out premium devices and they are receiving warm responses from consumers in key markets, even causing market analysts to expect stronger-than-anticipated first quarter earnings.
Since Koo Bon-joon, younger brother of LG Group Chairman Koo Bon-moo, became the firm’s chief executive, it has seen impressive developments in product quality.
``We have no doubt that LG Electronics is showing signs of improvement. Its Optimus smartphones are selling well and its Web-connected TVs with 3D functionality are also garnering more shares, globally,’’ said Baek Jong-seok, an analyst at leading local brokerage Hyundai Securities, citing 130,000 won as its target stock price.
LG Electronics shares are trading in the upper 80,000 won and lower 90,000 won range, an increase of over 20 percent from earlier this year, according to data from the Korea Exchange (KRX), the nation’s bourse operator.
``We are returning to basics. LG is solidifying product lineup and we will offer better pricing and guarantee on-time delivery with our advanced supply chain management (SCM) structure,’’ said LG executive Lee Kwan-sup.
As the world’s second-biggest TV manufacturer, LG is narrowing the gap with biggest rival Samsung in the race for 3D televisions thanks to decisions by struggling Japanese TV makers to adopt its technology.
Japan’s Sony, once Samsung’s key partner, as well as Panasonic are now aligned with LG’s, giving it a big chance to expand its presence in 3D TVs.
That means Japanese TV makers have begun selling sets using LG’s film-based 3D technology, which was previously unexpected..
Samsung grabbed an initial lead in 3D televisions as its battery-powered 3D glasses offer a clearer image. But LG has improved its technology along with better pricing.
And market situations are on LG’s side as Chinese, American and cash-strapped Japanese TV makers have stronger intent to use its technology as slowed demand is seeing a shift toward the cheaper 3D technology.
``This year will be different. LG Electronics is also in talks with major Hollywood studios for more customized 3D-only content. We are positive to increase our 3D TV business this year,’’ said Lee.
Market research firm DisplaySearch expects the film-based technology to gain more market shares and further narrow the gap with Samsung’s battery-powered system.
Since the third quarter of last year, LG Electronics has been leading the 3D TV market in the Asia-Pacific rim excluding China and Japan.
Even in Brazil, the single biggest consumer electronics market in South America, LG was the top 3D TV seller with a 43 percent share in the fourth quarter of last year, according to DisplaySearch.
In the Middle East and Africa, Samsung and LG Electronics are in a close battle. LG’s share was 35 percent, while Samsung’s was 45 percent over the last three months of last year. It was the first time that Samsung’s share was below 50 percent, according to the market research firm.
``A 25 percent share is enough for LG to become the world’s top 3D TV seller. We are quite confidant and I can say we’re not bluffing,’’ said LG Electronics TV head Kwon Hee-won.
Bullish outlook in smartphones
LG Electronics is also showing signs of recovery in smartphones. This year’s top word for LG Electronics’ mobile division is ``LTE,’’ short for long-term evolution.
It is giving its phones much-needed design upgrades, starting with its upcoming L-Series smartphones.
Market analysts have pointed to an improvement in the company’s smartphone business as the reason for investors to buy more LG Electronics shares.
``This year, we are aiming to sell 80 million handsets including 35 million smartphones. But more importantly, LG aims to sell 8 million LTE smartphones,’’ said Park Jong-seok, head of the company’s handset division.
The Optimus Vu, Optimus 4X HD and Optimus 3D Max could be strategic variants to help LG achieve or exceed its targets.
``I think LTE, high-definition and quad-core will be the key words this year. With fine-tuned technology and strategies, LG will recover our once-lost brand awareness,’’ said Park, adding the firm’s handset business is going to turn around.
Design is another key area. ``With smartphones, we sometimes took a more functional approach to design but with L-Style we’re going back to our roots as a company focused on how our products fit into the lifestyle of our customers.’’
Park presented the following as guiding tenets of the L-Style line, which aims to recreate the same feel of phones like the beloved LG Chocolate, and more recently, the Prada 3.0: ``Modern square design, floating mass technology, seamless layout, harmonized design contest and sensuous slim shape.’’
Analysts see the efforts as encouraging. ``Thanks to an increased portion of smartphone sales, the average selling price (ASP) ― the barometer to gauge profitability ― is rising, helping LG’s handset division see an improvement,’’ said Park Kang-ho, an analyst at Daishin Securities.
Lim Dol-yi, an analyst at Solomon Investment, expects LG to report 370 billion won in operating profit for the first quarter of this year helped by the turnaround in smartphones and TVs.
This is a major recovery. ``The worst has gone and we will gradually recover,’’ said LG’s chief financial officer Jeong Do-hyun.
LG Electronics targets 57.6 trillion won in revenue this year. The company said it plans to invest 1.6 trillion won on facilities and 2.6 trillion won on research and development.