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LGE: It's A Family Affair

by Richard Guppy | Aug 07, 2014

I confess that I used to be skeptical about LG Electronics’ future.  I considered it very much a follower in smartphones, forever struggling to come out with a new hit product that would propel it up-market as well as boost volumes for a time.  My revision of the LGE Dossier recently has changed all that for me.  Now I think LGE could become a leader.

The moment of conversion came when I read in Korean media how LGE has managed to secure operator distribution for its new G3 hero smartphone in China within 2 months of launch in Korea; whereas for the previous hero product, the G2, it took 12 months for it to do this.  I checked LG’s smartphone market share in China through SA’s Handset Country Share Tracker and confirmed that it has been virtually zero.  Getting distribution 12 months after launch has terrible effects on one’s brand: by the time the product reaches market, it’s old, and so the brand is seen as outdated and poor quality.  That leads to low demand which leads to late distribution for the next product, and so on for ever.

So, LGE has been a contender in the global smartphone rankings around number 3-4-5 according to whether you’re talking volume or value – WITHOUT operator distribution in China.  Imagine what LGE can do WITH decent or even strong demand in China.  This could really be the breakthrough it’s been looking for.

Of course, that breakthrough did not come by chance.  The strategic change at LGE was the appointment three years ago of the founder’s grandson as CEO, and his more visionary, longer term, integrated approach to LGE and other key companies in the group and in partnership, such as LG Innotek, LG Display and LG Chem.  That, coupled with his insistence on leveraging differentiating competences within the LG group, such as the display for the G3 smartphone.  Result: China wants the G3 immediately, not one year later.

What of all this?  In my opinion, LGE is a company to watch in smartphones and other mobile categories, while it may also grow in energy and automotive, per the CEO’s strategy.  LGE thus joins Lenovo as another contender to challenge Samsung and Apple, and to draw ahead of other would-be #3 rank vendors like Huawei and Sony.  Read the full Dossier on LGE here or contact me at rguppy@strategyanalytics.com.

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