WorldITShow Revamped LG unveiling full product lineup

Under ownership management, LG aims at early breakthrough

By Kim Yoo-chul

LG has been suffering over the past few years as it was late to join the league of the so-called “smart” consumer digital devices such as smartphones.

But LG officials and analysts believe that this year will be more than different from the last few as the LG brand is reversing that tradition with a rejuvenated, stylish and well-crafted product lineup.

They said LG, which is the world’s second-biggest TV maker, is finally receiving “product pulses” less than a year after it was shocked by a plunge in profit under the rein of its former boss.

LG has returned to management under the ownership of LG Group Chairman Koo Bon-moo as he has named his younger brother Bon-joon as the chief executive of the then ailing LG Electronics, replacing Nam Yong.

Nam, who had helped LG rise in the world of feature phones capitalizing on its impressive success of design-focused Prada-, Shine-, and Chocolate-branded mobiles, handed over the top seat to the younger Koo as he believed that the ship needed a new and charismatic captain.

“The managerial shift has improved LG’s operational result in almost all products such as television sets and handsets, allowing it to continue to benefit from new demands,” said M. W. Chun, a senior executive at LG Electronics in a telephone interview with The Korea Times.

The new LG boss has named Korean managers into all critical positions as Koo believes this will speed up the execution and implementation business decisions arising from better communication among employees.

The 60-year old Koo knew LG needed change as the company needed qualified products to better compete with its bigger rivals such as Samsung Electronics and Apple amid the rising popularity of tech-featured consumer devices.

The CEO has given more authority to the Korean management team, who had built an engineering powerhouse that excelled at manufacturing and selling high-quality TV units, refrigerators and scores of other products.

“The CEO’s Korean and even foreign executives predict that LG will prosper even as the economy slows as the product development will continue under ownership management. The initiative will help LG truly join the ranks of top-tier global brands,” said J.S. Park, another senior executive at LG’s handset division.

LG Electronics is investing more in hiring research personnel and for product development rather than increasing spending to boost its global image, according to LG officials.

Meanwhile, CEO Koo is himself checking up on local and overseas sites without prior notice and having more internal meetings with the company’s executives, as well as engineers.

“It may take more time for LG to reinvent itself. But the one clear thing is that LG has begun yielding something,” said Paek Jong-seok, an analyst from Hyundai Securities.

LG Electronics reported a first quarter profit of 131 billion won after two straight quarterly losses.

“Although the profit was more than halved from a year ago, LG is seen to increase profits throughout this year as it is getting better product lineups,” added Park from Hyundai.

Koo is credited for his deep knowledge of component-related businesses and he usually gives more initiatives to field-driven projects, which had barely seen the light inside LG just a few years ago.

The new LG CEO had significantly helped the company set up a flat-screen joint venture with Dutch-based Philips, which is now LG Display.

Aiming high for 3D TV

LG, which only trails Samsung in the global TV market, is quite upbeat about significantly increasing its share in the next-generation TV market — 3D TV units — as its in-house film patterned retarder (FPR) technology is receiving more attention from its potential clients.

TV majors are being cornered to find their next revenue sources amid the flattening television demand since the market is seeing signs of saturation.

Alerted by such signals, three-dimensional or 3D televisions have been emerging as “the next big thing” for TV makers, pushing them to invest heavily in several major projects.

Its FPR 3D tech is seemingly the first visible result since Koo took the helm of LG Electronics. LG officials said the tech also represents collective support from LG’s key affiliates including LG Display, LG Innotek and LG Chem. LG Display makes 3D panels with films from LG Chem and chips from LG Innotek.

Still, the global 3D TV market is being led by Samsung’s battery-powered technology, called shutter-glass technology, with the help of Samsung’s Japanese partners of Sony and Panasonic.

But LG is aiming high to take the fight to the market in an apparently looming tech format war around the 3D systems and recently more than welcomed comments from well-known movie director James Cameron as he spoke of his preference for LG’s tech.

“They would accelerate the adoption of 3D in the home,” Cameron said. The director of the movie Avatar was once a strong backer of Samsung’s battery-powered 3D technology.

The major market players pushing LG’s tech are currently Vizio, Philips and some leading Chinese TV makers. However, it has been in talks with Japan’s Sony to sell its tech.

“If the business deal with Sony ends with results, then that would be a major breakthrough for LG to boost the presence of its technology,” said Chun Seong-hoon, an analyst at HanaDaetoo Securities, another local brokerage.

LG had revealed that it was going to revamp the production lines to support polarized 3D products and ship them by September this year.

“In China, the tech is getting more attention and in Europe, consumers are having appetites to buy our cheaper 3D TV units. The future looks rosy,” said a LG Electronics spokesman Park Young-shin.

The FPR 3D glasses look and work much like the glasses used to watch 3D movies in theaters. The glasses are lightweight, don’t need batteries, operate well at wide viewing angles and are cheap at $10 or even less.

“That means that they are everything that battery-powered 3D is not,” add Park of LG Electronics, adding its polarized glasses avoid the reduced frame rate and flicker of the shutter-glass 3D units because no shutters are involved.

Its chief financial officer (CFO) Jeong Do-hyun expects LG to sell more of its cinema-branded FPR 3D TV products from this quarter capitalizing on Chinese and North American markets and said LG’s TV division will improve its profitability.

The lack of customized content is still cited as the main drawback to hamper the faster proliferation of 3D television sets and LG said it’s been focusing more on striking strategic alliances with leading content providers.

Smartphone comeback

Surely, the first of the quarterly round of calculations of the handset market share indicated that LG is losing some ground.

The South Korean vendor, a latecomer to the Android league, however, was seeking to consolidate its position by launching more premium models such as the Optimus 2X and Optimus Black with an aim to challenge smartphone heavyweights such as Apple and Samsung Electronics.

With the deep distribution reach that features LG’s mobile strategy, the top-tier Korean handset vendor said the new products will get more attention from consumers in developed markets.

LG is still suffering from operating losses, however, that’s not all the bad news because its handset division’s operating loss decreased to 101 billion won in the first quarter.

The LG CFO Jeong said his company will retain its earlier smartphone sales target of 30 million units by the end of this year, however, opening the possibility of revising the targets.

LG is aiming high for the latest smartphone lineup such as the Optimus Black and Optimus Big as the devices will help it regain its past glory as the leader of handsets.

LG’s lackluster performance in the rapidly-growing smartphone market had forced its handset division to report big losses for the past four quarters.

“After grappling with the problem of having a weak smartphone lineup, LG seems to have regained some of its competitiveness,” said Daiwa Securities, a Japan-based brokerage. LG’s smartphone share stood at just 2 percent as of the end of March.

“But our new models such as the Optimus 2X have been well received in advanced markets,” said another LG representative Na Joo-young.

LG is being asked to introduce more “hit models” in smartphones and tablets to better compete with rivals. LG launched its first tablet in Japan but analysts are still doubting that they have “clear, distinguished and differentiating characteristics,” when compared to those offered by its rivals.

Its laptops with sleek designs and a series of Internet-enabled home appliances are also expected to contribute to getting its mojo back, according to analysts.

LG is one of the few leading entries in the Korean stocks which was left out of the KOPSI’s bullish run.

According to the data from Korea Exchange (KRX), the nation’s main bourse, LG shares lost over 10 percent so far this year, while the benchmark KOSPI index rose by some 7 percent.

“But LG is showing a sign of turning around. Investors should see LG’s ongoing changes take a strong effect because LG will sell more of its advanced smartphones and TV sets amid the high season,” said Kwon Seong-ryol, an analyst at Dongbu Securities.

The leading local brokerage maintained its view on LG shares reaching 154,000 won per share and chose LG Electronics as its “top pick.”