Koo's steady hands

LG Chairman Koo Bon-moo, second from left, talks with LG Uplus CEO Lee Sang-chul, left, and LG Electronics Chief Technology Officer Ahn Seung-kwon, second from right, during the group’s executive meeting at LG Chem’s technology center in Daejeon last year. / Courtesy of LG Group

LG to release new smartphones in emerging markets

By Kim Yoo-chul

LG Group is bouncing back with its flagship LG Electronics experiencing a business turnaround on the back of a strong recovery in its handset business.

The net profit margin is improving, meaning LG is in a better position to control costs and make effective sales plans to increase revenue.

In addition, it has successfully rolled out competitive products in emerging and key markets, giving investors a good reason to return to LG stocks.

Some uncertainties still remain as the firm faces an unfavorable economic situation and intensifying competition in its core businesses; but the group is looking ahead rather than worrying about external factors.

"We won’t be very aggressive in promotional campaigns. Rather, LG will concentrate on marketing activities in line with the release of new products,’’ said LG Electronics CFO Jeong Do-hyun, stressing that LG is expecting a better net profit margin this year.

The executive is impressed with LG’s meaningful recovery in its two traditional cash-cows ― mobile phones and televisions.

"When you look at our smartphone business, the Optimus G has so far been very effective in terms of sales. We are planning to release new smartphones in strategic regions in response to market expectations. In TVs, we believe the worst is over in Europe and the United States,’’ the CFO stressed.

The company plans to introduce its new Optimus G sequel ― the Optimus G II ― in the latter half of the year based on smooth global sales. Over 1 million Optimus phones have been sold in the four months since its launch.

Additionally the firm’s TV business is ahead of its rival Samsung Electronics in terms of technology specifications and the timing of new product launches.

LG was the first to completely halt the production of cathode-ray tube (CRT) televisions ahead of Samsung and to cut its reliance on plasma televisions, resulting in a faster transition toward profitable OLED TVs and LCD TVs using light-emitting diodes (LED) as a backlight.

The OLED screen is thinner and brighter than the current industry’s mainstream LCDs.

Although major TV manufacturers are migrating to OLED TVs for a "first-mover’’ advantage in the market, most of them are experiencing challenges in production yields due to technological barriers and high costs.

LG plans record investment

LG Display, the display-making affiliate of LG Electronics, said it will invest 706 billion won in its OLED display panel producing line in its Paju plant.

The move is in line with the latter’s plan to gain a competitive edge against Samsung in the OLED TV race. LG Electronics, which holds a 38 percent stake in the display unit, beat Samsung in launching a 55-inch OLED TV in January.

The production line will manufacture mother glass panels that will be used to make six 55-inch OLED screens.

"LG Electronics is building a brand that is recognized for great picture quality,’’ said Kwon Hee-won, the head of the television division.

"With our advanced display technology, we are confident that our products will lead the next generation of TVs in 2013 and beyond,’’ he recently told The Korea Times.

LG has received more than 100 pre-orders for its 55-inch OLED TVs, which cost more than $10,000 each.

The company also plans to roll out a 55-inch curved OLED TV that surprised the world in this year’s technology show in Las Vegas, in the latter half of 2013 said another senior LG executive.

LG plans to invest 2.5 trillion won in facilities ― a record sum ― this year out of a projected revenue target of 53.5 trillion won.

Most of the investment will go into its traditionally-strong businesses, while some will be used to create new platforms in emerging businesses for growth with a renewed focus on product quality and sales support.

With smartphones and TVs, its commercial air-conditioner unit is also preparing a comeback, which LG believes is another factor for corporate growth.

The launch of the "Multi V III’’ commercial air conditioner range has given the company an advantage which it intends to build on, with a range of investments in marketing and training.

"We want LG’s product focus to be on quality, not just sales volume. We now have a high level of engineering and a high level of support,’’ the company said.

This upturn is pushing Fitch Ratings to positively view the company.

"Fitch expects LG Electronics’ margins to remain stable in 2013, backed by its solid market positions in the TV and appliance businesses, as well as by the gradual recovery in its smartphone competitiveness,,’’ Fitch said.

Fitch sees the weakening Japanese yen elevating competition in the TV industry where the company struggled to maintain healthy margins during the second half of last year.

"However, Fitch does not expect LG to lose its competitive edge over its Japanese peers. Within LG Electronics’ smartphone business, Fitch forecasts that recovery in margin and market share will be slow but steady, on improvement in quality and brand recognition,’’ it said.