LG Electronics gripped by G5 failure

[THE INVESTOR] LG Electronics, once considered a smartphone powerhouse along with Samsung Electronics and Apple, may feel like tumbling down a steep hill due to the disappointing performance of its flagship mobile business in recent years.

After the sluggish sales of the G4 in 2015, the tech company had to eat humble pie once again with its latest high-end smartphone G5 when the latest marquee device lost its steam rather fast. 

Unveiled in March 31 with much fanfare, the G5 topped smartphone sales in Korea during the first week of April. Sales on the day of its launch reached 15,000 units -- three times that of its predecessor.

But things turned sour just a month later: daily sales nosedived to 3,000 units in May, and the phone slipped to the fourth place in terms of smartphone sales in the following weeks, according to market research firm Atlas Research & Consulting.

Supply shortage was cited as the main reason for the sales drop, but the fundamental problem ran deeper, according to market watchers.

“Compared to Samsung’s smartphone, the G5 lacks a premium image and looks rather like a toy, which is a huge turn-off for consumers,” said a source from the telecom sector on the condition of anonymity.

The G5, the first modular phone in the world, is far from complete.

The phone’s modular devices including a camera-equipped rolling bot and a drone controller, have not even hit the shelves yet, while some users complain about the stability of the phone’s external modules.

The lack of appealing features and a premium image has placed the G5 in an uphill battle against even the outdated iPhones and Samsung’s mid-range handsets such as the Galaxy A and J lineups.

The G5 was ranked 10th in terms of sales while Samsung’s mid-range smartphones Galaxy J7 and K5 took sixth and eight places, respectively, in the fourth week of June, according to Atlas Research & Consulting.

Newcomers in the market including Pantech’s mid-range Sky IM-100 are also posing a threat to LG.

To help rejuvenate its mobile communications business, LG recently set up a new position called the “program management officer,” under LG’s mobile business chief Cho Ju-no. The company also merged several sales and marketing divisions to improve efficiency.

The restructuring is aimed at putting more focus on developing high-end smartphone products, including the G and V smartphone lineups, the company said.

Despite such efforts, it would be hard for LG to turn things around in a short time, according to market watchers.

“Annual sales of the G5 will stand at around 5.5 million , and LG’s mobile business will post around 400 billion won (US$344 million)of operating loss this year,” said Go Jung-woo, an analyst from NH Investment & Securities.

Cho Jin-ho, an analyst from Mirae Asset, said LG’s mobile business will likely continue to suffer an operating loss before the launch of the high-end smartphones, G Flex 3 and V20, in the fourth quarter this year.”

By Kim Young-won (wone0102@heraldcorp.com)