Back To Top

LGE’s nagging slump puts CEO to the test

LG Electronics is used to being No. 2.

A powerful global electronics brand in its own right, the Seoul-based company has not made it to the highest of peaks. This seemed to be all right, however, as long it could rub shoulders with its top-tier rivals.

But a raging “smart war” in the mobile industry changed all that, and LG Electronics is in bad shape in that sector.

Koo Bon-joon, vice chairman and CEO of LG Electronics and younger brother of LG Group chairman Koo Bon-moo, was the reliever brought in last year to help LG back on its feet. 
LG Electronics vice chairman Koo Bon-joon (right) shakes hands with a labor union leader during a soccer match between labor and management in Changwon, South Gyeongsang Province. (LG Electronics)
LG Electronics vice chairman Koo Bon-joon (right) shakes hands with a labor union leader during a soccer match between labor and management in Changwon, South Gyeongsang Province. (LG Electronics)

But industrial analysts share doubts over whether he can find a quick fix. They say a dramatic turnaround seems far from sight.

“The first quarter for handsets was better, but it was only to the extent where it reduced its deficit,” said Park Gang-ho, an analyst with Daishin Securities.

He said that eventually, the handset division should pick up, but added that the pace of recovery is slower than expected.

LG is the world’s third-largest handset maker but its mobile communications division has been faltering to become a major cause of the company’s overall lackluster performance.

During the months of January through March, the electronics maker as a whole managed to swing back into the black, but only by the skin of its teeth.

The mobile communications unit registered more red ink, with the operating deficit standing at 101.1 billion won.

The operating profit rate of the company’s mobile communications unit stood at -3.5 percent, lower than the industry average.

One thing that LG Electronics is doing ― but should not be doing, according to experts ―is frantically freezing costs and whatever else it takes to improve its profit margin.

“This is a time when LGE should be moving more aggressively forward, investing in areas where they should and not looking back,” said one industry expert, noting that about a decade ago, the company had developed one of the first tablet PCs around, but scrapped it citing costs and lack of demand.

Given the dire circumstances, LGE’s new CEO had a tall order to fill.

Part of Koo’s strategy to reach out to employees was urging them to “get tougher.”

“Tougher DNA” was required, he said, and he would be doing his best to make sure each and every worker had it.

In the restrooms at LG’s Seoul headquarters, the stalls are plastered with all kinds of campaign talk calling for employees to take the initiative to change and once again aim for the top.

But the campaign has yet to yield any real results.

In fact, LG Electronics shares have fallen under the psychologically important 100,000 won level.

It ended at 98,500 won on Wednesday, and was worth about one-10th that of Samsung Electronics shares which closed at 911,000 won.

No money, no killer products

No money for new businesses also means no dough to invest in up-and-coming technologies, nor new products.

According to news reports here, LG Electronics has given up developing long-term evolution technology-based chips for 3G and LTE smartphones because it can’t handle the costs.

As plan B, the company is reportedly looking to buy dual-purpose chips, or a 3G+LTE dual-band one chip. Qualcomm, the U.S.-based mobile chip giant, was cited as one potential supplier.

LG’s LTE chip is not interoperable with 3G, meaning it would have to develop a mobile application process and 3G telecom chip ― projects requiring extensive financing.

This means the Revolution smartphone may go down as LG’s first and last phone to use its own LTE chip.

LG Electronics officials denied all the related reports.

LG, meanwhile, also has failed to secure a smart device lineup capable of winning supremacy in the market by besting top rivals Samsung and Apple.

It is scheduled to release the 9.2 mm thin smartphone with the 700 nit NOVA display,

Optimus Black, and the Optimus Big, the “big screen phone” touting a 4.3-inch display, later this year.

But none of the new smartphones it has recently unleashed so far ― including the ambitious dual core 2X ― have been making noticeable dents in the competition.

The company’s first tablet PC ― the Optimus Pad, known as the G-Slate in overseas markets ― has not been flying off the shelves as LG would have liked.

“We can’t release the figures yet,” said Na Ju-young, a spokeswoman for LG Electronics. “It’s still very early, so we don’t have them.”

The G-Slate was launched in March, starting with Japan and the U.S. The company has tentative plans to unleash more supplies in Europe and the Middle East.

But rumors have it that the company has actually called time on the pad.

Industry watchers note that if the tablets were popular, LG would have taken no time to release the figures.

The first strike against the G-Slate is that it’s expensive ― with a two-year contract, it costs $530 with data plans that range from $24 for 200MB a month.

Another is what experts and bloggers have called “puzzling” features, such as the 3-D recording function, which could be impressive, except it only records in red and blue.

The pad, therefore, comes with a set of red and blue 3-D glasses, the kind last seen in the 50s.

But some analysts remained positive about an eventual turnaround, possibly starting in the third quarter.

“When some of these new smart devices hit the markets, the mobile communications division may stand a chance of turning back into the black in the third quarter,” said Noh Geun-chang, top analyst with HMC Securities.

By Kim Ji-hyun (
catch table
Korea Herald daum