‘We are still in crisis’

By Park Hyung-ki

QE taper, slow TV sales, smartphone competition overshadow LG Group

  • Published : Jan 17, 2014 - 20:39
  • Updated : Jan 17, 2014 - 20:39
LG Group’s key tech subsidiaries, such as LG Electronics and LG Display, are expected to face uphill battles this year as they try to regain their former glory and narrow the gap with leaders in the television and smartphone markets.

Macroeconomic uncertainties stemming from monetary cuts in the U.S. and the Japanese yen’s depreciation are further clouding LG’s prospects for this year as such factors will affect overseas sales especially in emerging markets most vulnerable to quantitative easing tapering.

This prompted chairman Koo Bon-moo to reiterate to some 40 executives that “LG is in a crisis,” and they must brainstorm executable business models and strategies that can help the group and its key companies weather the storm ahead.

LG Group chairman Koo Bon-moo
Faced with slower TV sales and fiercer smartphone competition globally, the chairman urged his executives to try to “turn risks into opportunities” even amid the difficulties of forecasting technological changes.

“We must find ways to win even with the limited resources we have, and seek changes through small steps,” Koo said.

LG Electronics, which used to be the group’s main flagship, continued to see its global market share for LCD TVs fall in part due to the weak demand for premium TVs amid the economic slowdown.

Also, the rapid rise of its Chinese competitors with lower-end TVs have made Korean players including Samsung Electronics lose their edge, analysts said.

“The quality of Korean products is definitely much better than Chinese brands, but consumers wanted inexpensive TVs (during the slowdown),” said Jeon Byung-ki, analyst at Etrade Securities.

The global TV market has been slowing since 2009 when the financial crisis erupted, and the size of the LCD TV sector fell from $118 billion in 2010 to an estimated $96 billion in 2013, the analyst noted.

LG Electronics, whose flagship authority had been taken over by LG Chem, will have to come up with a better strategy that can help it secure new growth engines for both TVs and smartphones.

Given it may take another decade before it can mass produce OLED TVs for global consumers, the country’s second largest electronics company may have to seek growth with its existing business by, for instance, developing and offering unique features enabling connections among its home electronic appliances.

“Home networking systems could be what the company needs to secure new growth,” said Yoon Hyuk-jin, an analyst at Eugene Investment & Securities.

The smartphone latecomer is also facing an unclear business future as the market has become “matured, saturated and fiercely competitive,” analysts noted, even though LG was able to stand out from Samsung Electronics and Apple’s shadows with its Optimus G and G2.

LG Display, whose major shareholder is LG Electronics, has also been losing luster not only due to slow TV growth, but also the increased Japanese production of in-cell touch panels for Apple smartphones, Jeon of Etrade said.

Japanese players such as Japan Display and Sharp have been gaining ground on the back of the weak yen, boosting production of the panel that enables Apple to have a higher resolution and thinner Retina display.

By Park Hyong-ki (