As figures showed that LG's mobile communications (MC) business managed to reach the break-even point (BEP), eyes are on the next move of LG Electronics.
Though LG launched its flagship smartphone “the G4” in April, its operating profit stood at a mere 200 million won. In a regulatory filing on Wednesday, LG said its MC business logged sales of 3.65 trillion won (USD 3.33 billion) and an operating profit of 200 million won in the second quarter.
Though its sales edged up 0.4 % from the same period last year, its operating profit nosedived 99.7 % year-on-year to 200 million won from 86.7 billion won. It is probably because LG splurged on marketing the G4 smartphone so as to gain more ground in the smartphone market, carved up between Samsung and Apple.
The G4 has also failed to find favor with consumers in overseas markets. Launching the G4, LG estimated that combined sales of the LG G4 would hit 12 million but LG sold less than 300,000 units in the domestic market.
On July 22, rumors started to circulate among securities firms that Google would take over LG Electronics. To the chagrin of LG, the rumors actually sent LG shares rallying.
“Much lower-than-expected sales of the G4 got investors thinking that LG would be better off being taken over by Google. Unless the MC business’s performance returns to normal, similar rumors could continue to plague LG,” said an securities firm analyst.
However, it’s uncertain whether the MC business will take a turn for the better as LG increasingly finds itself sandwiched between premium smartphone makers (Samsung and Apple) and Chinese manufacturers of low-cost smartphones, i.e. Huawei and Xiaomi.
In fact, things get tougher. While Apple tightens its grip on the high-end smartphone segment, Chinese brands such as Huawei and Xiaomi gained a firm foothold in the mid- and lower-range price segments. “High-end Android smartphone prices are likely to fall. As Chinese smartphone makers are fast increasing their share of the global market, the prices of low- to mid-range smartphones would fall sharply as well,” said Cho Jin-ho, an analyst with Mirae Asset Securities.