LG to face tough road with new smartphone

By Lee Min-hyung

LG Electronics is highly unlikely to rebound with its new high-end smartphone as global demand has switched to lower priced handsets, analysts said Monday.

They say it will be tough for the nation’s No. 2 handset maker as customers are preferring less-pricey options amid the rise of Chinese manufacturers such as Huawei and Xiaomi.

“As the demand for premium smartphones continue to stagnate, the company is not expected to make a huge profit by releasing its new model,” said Lee Seung-woo, an analyst at IBK Securities.

The comments came on the same day that LG Electronics mobile devices chief Cho Juno said the company will release a new premium model in the fourth quarter, which he said will improve the company’s recent poor performance.

But it is doubtful whether the new model will be a game changer to drive the company’s handset business. This year, LG has failed to gain momentum in the market, with its latest flagship G4 model failing to compete with Samsung’s Galaxy S6.

On Saturday, two of the nation’s leading carriers ― SK Telecom and KT ― reduced the price of the model to 699,600 won ($584) from the previous 825,000 won, a day after Samsung’s Galaxy Note 5 and Galaxy S6 Edge Plus (Edge Plus) made their debut here.

“The move shows that customers continue to lose expectations for LG smartphones,” an analyst at Meritz Securities said on condition of anonymity. He said the price decline reflects that the company has failed to keep upward momentum since its success with the previous G3 model.

Last week, U.S.-based market researcher Gartner said in a report that LG ranked fifth in the second-quarter in global smartphone market share, lagging slightly behind China’s low-priced handset maker Huawei. Samsung was No. 1, taking up 19.9 percent of the market, followed by Apple and Microsoft, holding 10.8 and 6.2 percent, respectively.

The report said LG’s second-quarter sales figures have also seen a decline on a yearly basis, while Huawei has increased its market share from 4.1 percent to 5.9 percent during the same period.

But John Park, an analyst at Daeshin Securities, said LG might have shown a poor performance in the second quarter as the G4 was released in April, which means sales figures for the model are not fully reflected in the report.

“Although the G4 failed to improve the company’s profitability, the release of the new model is expected to bring a positive result on the company,” he said.

Meanwhile, the company’s mobile communications business, which handles smartphones, posted 200 million won in second-quarter operating profit, down 99.7 percent from a year ago.