As LG Electronics announced the performance of its Mobile Communications (MC) business division (in charge of smartphones) for the fourth quarter of 2015, the industry response can be summed up as “It wasn’t bad, but the future seems dark”. (Image : Yonhap)
SEOUL, Jan.27 (Korea Bizwire) – As LG Electronics announced the performance of its Mobile Communications (MC) business division (in charge of smartphones) for the fourth quarter of 2015, the industry response can be summed up as “It wasn’t bad, but the future seems dark”.
The MC division reported a loss of 43.8 billion won in the fourth quarter, marking its second consecutive quarter in the red. Considering the even bigger loss from the previous quarter (a loss of 77.6 billion won), the performance in the fourth quarter was improved. However, it wasn’t enough to meet expectations.
LG’s bread and butter, the G4, and its V10 premium phone boosted sales in the North American market, leading to slight improvements. The companies Nexus 5X, developed in collaboration with Google, also added a helping hand.
However, the problem was that sales of low end smartphones were disappointing, when they should have been playing a leading role in improving the company’s financial performance.
Manufacturers can be profitable by selling mid and low-priced models, which offer R&D, human resources, and manufacturing cost savings. Unless the sales are explosive, like LG experienced with its G3, the performance of premium models doesn’t overall profits.
Industry watchers commented that because sales of premium models in the American market were decent, LG was able to achieve a certain amount of success. “Even so, if they want to improve performance, LG needs to increase the sales of their low end models. However, the global sales of low end models are not looking up, which is slowing down sales growth.”
The global smartphone market is in a period of chaos with various mid and low-priced models locked in cutthroat competition. Some observers say LG committed a fatal error by releasing products randomly without a concern for developing a strong brand.
The release of the K series at the start of the year was an attempt to gain an upper hand in the market, but the company’s outlook is shrouded in uncertainty.
Samsung Electronics already has three low end models (Galaxy A, J, E), and Chinese manufacturers Huawei, Xiaomi and Lenovo are bringing forth compelling offerings.
Industry officials say that since the market response to the K10 has been encouraging, LG still has a chance to improve its sales. If the G5, which will be released next month, results in sales greater than expected, a sales boost during the first and second quarters could be anticipated.
By Francine Jung (francine.jung@kobizmedia.co.kr)
