LG Electronics sees breakthroughs in handsets
Customized strategies help early comeback
By Kim Yoo-chul
LG Electronics is set to make an early comeback in the market for smartphones and feature-added digital devices such as tablet PCs.
After a year-long slump in its critical handset business mainly due to its laziness in developing premium portable digital devices, the South Korean consumer electronics maker expects its latest Optimus One to help raise its presence in the rapidly-growing and highly-lucrative smartphone market.
A smartphone is a handset that provides advanced computing ability and a greater connectivity than a traditional one. It is the fastest growing sector of the mobile phone market, inviting handset majors with updated and fine-tuned strategies.
As for the responsibility for the late response in smartphones, LG brought Koo Bon-joon, the younger brother of the LG Group Chairman Koo Bon-moo, to take over the top seat at the conglomerate’s key electronics affiliates.
In the third quarter, the net profits of LG Electronics were down 99.2 percent year-on-year, while operating results were in the red with a loss of 185.2 billion won because of the ``smartphone plunge.’’
But changes have already been made from products to decision-making structures in what market analysts claim is ``quite inspiring’’ to improve future outlook.
The new chief executive has given critical roles to field-experienced executives in a strategy to boost LG’s capability to better handle its hardware edges.
``The appointment of the owner family to the top position is a reflection of LG’s willingness for execution as he is currently the right man for the job of CEO to show strong leadership,’’ said an unnamed high-ranking executive.
Optimus One & Windows 7
LG's strategic Optimus One smartphones have received impressive initial responses from consumers overseas, as well as on home turf in the Korean market.
LG began selling the Optimus from early October to some 90 countries via 120 carriers.
An LG spokesman, Yoon Won-il, said the company is ``extremely positive’’ in acclaiming the Optimus as another ``10 million seller following the success of the previous Prada, Chocolate and Shine models.
``LG is aiming to see 10 million sales of the Optimus One sometime within the first half of next year,’’ he said.
Yoon declined to comment over the cumulative sales of the Optimus outside the peninsular since its introduction, but added LG has seen a steady sales increase of the Optimus here.
Jung Do-hyun, the chief financial officer (CFO), at LG Electronics recently said the company is aiming to sell three million Optimus handsets this year.
LG lifted its local handset shares to 19.3 percent as of the end of last month from 15 percent in September thanks to notable sales of its smartphones, according to the company.
``Since its local debut, we have been sold over 250,000 of the Optimus,’’ said Yoon of LG, adding the company will release more variants of the Optimus in different colors.
The Optimus has the standard 3.2-inch multi-touch screen, a 3-megapixel camera, GPS, Bluetooth and a microSD card slot.
Although the One’s embedded 600MHZ processor is a little under-powered, the word is that LG makes up for its average processor with an above average 1500mAH battery.
Phone users say another advantage is the fact that the Optimus is using Google’s Android 2.2 version, not 2.1, saving the hassle of waiting for an upgrade.
``The device is highlighted with advanced Google integration with an imminent information search and voice search on offer, not to mention Google Goggles, which makes searching based on images possible,’’ said Yon Sang-ik, a 35-year-old worker at a software company, in a recent street interview with The Korea Times.
``In terms of design, it’s nice looking though some more work will be needed to completely change the lower-end of the smartphone spectrum,’’ according to the official.
As for further back-up measures to soothe market concerns over the lack of follow-up models, LG is driving up sales of the so-called Windows 7 smartphone.
Yoon at LG said the 3.5-inch full touch screen Optimus 7Q that uses a QWERTY keypad on the screen will be introduced in the United States from November 21 through AT&T.
LG said the smartphone that uses Microsoft’s Windows Mobile platform as the benchmark operating source has already been launched in five European countries including the United Kingdom, France and Germany since mid-October.
In Asia, Singapore and Australia are the current two markets that have LG’s Optimus 7 devices.
In applications, which are considered critical for better usage of smartphones, LG is trying something different by providing various free apps in categories such as social networking, utilities and even gaming via its pre-loaded store.
``We are targeting to make the local debut of the Windows 7 phone in the latter half of next year,’’ said a senior LG spokesman, Oh Sea-chun.
In tablet PCs, where top-tier handset makers and even PC makers are rapidly jumping into the booming segment, initially ignited by the smartphone frenzy, LG is attempting to enter a new phase in the PC segment because it wants to prove itself as a serious player.
LG officials say the company is looking to release its first-ever tablet PC with the Android OS in the first quarter of next year.
To better compete with its biggest domestic rival Samsung Electronics and overseas ones such as Hewlett-Packard, Dell, Toshiba and Research In Motion (RIM), LG will introduce a 8.9-inch tablet PC that runs Android 2.3 Gingerbread.
It is larger than that of Samsung Electronics’ 7-inch Galaxy Tab but smaller than Apple’s 9.7-inch iPad.
With advanced software specifications, LG is hoping its tablet lays a solid foundation for a strong and early turnaround in its handset units.
Structural realignments
LG was blamed for its late execution in key issues as the former LG CEO had taken more time to make LG a truly international player by hiring foreign executives, rather than focusing on product development.
It is still debatable whether such ``unprecedented measures’’ will pay off in terms of LG’s competitiveness.
But LG now believes in its fine-tuned and slimmer organizational structure with more focus on hardware-driven strategies.
The company recently merged its smartphone and feature-phone units into one and created an R&D division aimed at controlling its research performance overseas.
Since Koo’s appointment as the chief executive, executives with field experience were also brought in to handle product qualities of LG’s handsets and even televisions, according to LG officials.
LG has spent 8 percent more on R&D as of the end of the third quarter from the previous one as it added over 500 staff to its research workforce.
As for marketing strategies, which were formerly handled by a foreign employee, the company separated its global product strategy division into three smaller teams that are each tasked specifically to smartphones, feature phones and next-generation mobile gadgets, LG said in a recent statement.
``It’s challenging and bold decision making in the latest series of restructuring and this shift means that the new CEO Koo is keen to round up LG’s needed resources to give new momentum to the improved handsets,’’ said an LG official, asking not to be identified.
``The moves were aimed to improve product development and allow for faster decision-making,’’ Oh of LG said.
In a report to clients, a local brokerage Hi Investment said the share of LG Group is set to rise as LG Electronics is preparing for an early comeback, in addition to the continued help from the group’s chemical affiliate ―LG Chem.
``LG expects the turnaround either from the first or second quarter of next year,’’ said the CFO, Jung.