LG mobile boss faces tough leadership test

G5 handset receives impressive response

By Kim Yoo-chul

Can LG Electronics get its mojo back and stand up to Samsung Electronics and Apple in the fight for a bigger slice in the global smartphone industry?

Given the initial impressive sales of its latest flagship smartphone ― LG G5 ― expectations are high that the G5 will help LG muscle in on the two market leaders and rising Chinese competitors.

According to officials at LG Electronics and its mobile carriers, the G5 has been selling 15,000 units daily in Korea since the device’s March 31 launch. This is three times that of its previous model, they said.

“To respond with growing consumer demand, LG’s handset manufacturing lines in Korea are in full operation,” an executive at an LG technology affiliate said, Sunday, adding that LG will soon begin producing the G5 at its plants in Vietnam.

Officials say the fate of Cho Juno, LG Electronics’ CEO and mobile chief, will depend upon the success of the G5, as Cho directly managed the development of the G5 from early stages.

The most distinguished features that differentiate the G5 from other phones are the company’s decisions to adopt a full metal body, detachable battery and modular design, which officials say were decided by the LG CEO.

“Cho has taken a serious approach for the G5,” said the executive. “LG’s decision to unveil the device at February’s mobile convention in Spain sent the message that the G5 is mature enough to directly take on Samsung Electronics’ Galaxy S7 in the market. If G5 fails to make a substantial impact, then Cho’s leadership will be questioned.”

The so-called “Cho Juno mobile” is made in close collaboration with LG Group’s technology affiliates, as LG Display, LG Chem and LG Innotek supplied its state-of-the-art display, battery and camera module, respectively.

Ambitiously, the G5 equals the Samsung Galaxy S7 in terms of suggested retail price, a major reversal from its long-time pricing strategy in which LG has been offering its flagship model at heavier discounts than Samsung devices.

Still, it seems too early to say whether or not the G5 will land in the market softly, as some call the decision to adopt the modular design controversial.

“How strong LG’s third-party supporters are is the key for the fate of the modular G5,” said the executive. “If more third parties join with LG for the development of G5-compatible accessories, then LG may create its own ecosystem, meaning should LG invest more in accessory developers.”

Cho didn’t comment on the sales target of the G5, however, stressing that it will satisfy the demand of consumers seeking “something interesting.”

“G4 received a good response from professionals thanks to the highly advanced camera function, but the model received a lukewarm response in the markets, awakening me that LG needs radical differentiation to win more from consumers,” Cho recently told reporters.

The LG mobile chief started his career in the mobile industry in 2000 and he significantly helped LG rise as a titan in the era of “feature phones” with the huge successes of Chocolate- and Shine-branded phones in 2004 and 2007.

He handled LG’s mobile phone business in the United States and was named company CEO after the approval of its shareholders on March 18.

LG’s mobile business reported 43.8 billion won in operating losses last quarter.

Good review

The G5 has been available in the United States, which LG considers its most-crucial market, since April 1. LG hopes to maintain its impressive initial momentum in Europe and the United States, as well as South Korea.

Due to its tightened marketing budget compared to its chief rival Samsung Electronics, LG has been focusing on Europe, Southeast Asia, South America and the United States rather than China.

“LG Electronics will be aggressive even in China,” said the executive. “However, LG won’t follow Samsung Electronics in marketing. We will do the best we can. Huge offline marketing activities are cash-intensive. The company’s top priority is to have more LG-fanboys even though the numbers will be small.”

Local analysts said the G5 will make a positive impact on the bottom line of LG Electronics in the first quarter of this year.

Hyundai Securities analyst Kim Dong-won said sales of the G5 will reach 10.6 million units, up 136 percent from the G4. “G5 will be the most successful model in terms of sales given our inventory checks,” Kim said.

Kim Ji-san from Kium Securities said it’s possible that the G5, which is available in four colors (silver, titan, gold and pink), will become a “10 million seller” in 12 months.

Considering LG Group’s unique supply chain management, brisk sales of its flagship mobile affects the sales and profits of the group’s component units including LG Display, LG Chem and LG Innotek.