Life’s Good – not fair. LG mobile phone division is suffering (opinion)
LG makes great phones. Its G7 and V30+ ThinQ are top performers and more than a match for Android competitors. But the LG mobile phone division is suffering.
For each of the past five quarters, it has lost between US$172 and $400 million. Analysts are saying LG’s persistence in the smartphone market is admirable. But the market is toxic, and something has to give.
Don’t worry, LG’s other divisions are doing nicely. Its investment and leadership in OLED TVs has paid off. Its home appliances are doing very well. Air solutions (air conditioners) are breezing along.
LG mobile phone division is suffering because the smartphone market is mature and filled with new aggressive players
First, I want you all to seriously consider the G7 ThinQ (GadgetGuy review here). It is a great device. You will be very happy with it.
If you have a few more dollars its uber flagship V30+ ThinQ (GadgetGuy review here) is incredible too and it is on special at JB for an amazing $799 (RRP $1199).
But no matter if we all bought an LG it would not change the situation. The market is toxic.
The Android market has reached saturation point
- There are 3.1 billion active smartphone connections and Android accounts for about 85% of that.
- In developing markets like India and China Android accounts for over 96% of sales.
- India and Asia are rapidly growing markets buying lower cost, locally assembled handsets (mainly Chinese brands).
- In mature markets like the US and Australia Android accounts for about 50% of sales.
- The average handset age is just under two years reflecting a disposable mentality.
- About 50% are on Android 7 or 8; 25% on Android 6; and the remainder on Android 1-5 (never to upgrade).
- The average price of a handset is well under $200.
- There are over 100 active Android handset makers and 80 or more that make occasional or niche models.
- The flagship segment (over $1,000) has consistently accounted for under 10% of sales. But it looks like this figure could double in 2018 due to increasing affluence.
- Samsung has nearly 40% of the Android market. Chinese ‘Tigers’ (OPPO/vivo/OnePlus, Huawei, Xiaomi and Motorola) have about 40% of the market between them.
The Chinese tigers are aggressive and pursue a win-at-all-costs mentality
LG, in a most humble way, pointed to huge increases in marketing-related expenditures to release its flagship devices. These increased costs did not necessarily result in sales.
LG does things in a most refined manner. It has above-the-line advertising campaigns, product launches, and good websites. It plays by the traditional marketing rules.
By comparison, the Tigers are voracious hunters. They are adopting guerilla strategies that are killing the market for LG. And we assume HTC, Sony and to a lesser degree Samsung.
In an interview with Sam Skontos, chief of Alcatel he said that the Tigers were throwing money at the traditional retailers to gain market share. And some were moving 100% to below-the-line social media channels. It was no longer good enough to try and carve out a niche based on quality or features.
In an interview with Danny Adamopoulos of Motorola he said that the new six-month model cycle was a nightmare for retailers. New features, not brand loyalty drives the fickle Asian market. Motorola would not play that game (at least in mature markets).
Michael Tran, OPPO chief and one of those ‘Tigers’ agreed, “In China, if you don’t innovate and deliver exciting new phones to the market regularly, it’s easy to be left behind. That’s why we continue to deliver exciting new devices every six months.”
GadgetGuy’s take. Want to throw money away? Become a smartphone maker
Apple and Samsung are category leaders. Both have strong loyalties and unique products. As long as they don’t too much wrong will continue that way.
I started this article because I felt sorry for LG. Its phones are brilliant. But then so too are Sony and HTC that are suffering reduced market shares and suffering losses as well. These respected companies need to adopt Tiger tactics or fade to obscurity in the smartphone race.
And you know what? The Tigers make very good products. I guess the winner is – you!
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