If the standing position is different, the view will change. This is true of Samsung Electronics and LG Electronics’ smartphone business. On one side, the company maintains the world’s number one smartphone market share, and the other continues its 20th consecutive quarter of deficits. As the two leading companies in Korea are compared on the same line, at least in the smartphone business, business goals and strategies are bound to be different. This year, the two companies are turning their smartphone business into a one-of-a-three in corona 19.
Samsung aims to share, profitable two rabbits
Samsung Electronics is maintaining an uneasy no.1 position. For the ninth year in a row, the gap with huawei, the second-largest smartphone market, is narrowing. Last year, Samsung Electronics was closely chasing second-place Huawei, which had a 15.6% share of smartphone market share worldwide at 19.2%, according to market research firm Gartner.
Emerging markets such as China and India are struggling. In the Chinese market, huawei, oppo, Vivo, Xiaomi and other local companies have been pushed back, with a share of around 1%. Huawei accounted for 40% of the chinese market in the first quarter of this year. India, which has a strong smartphone market, was also pushed by Chinese companies to third place. According to Counterpoint, Samsung Electronics’ market share in India in the first quarter of this year was 16%, followed by Xiaomi (30%) and Vivo (17%).
Samsung Electronics is working its mid-range lineup, including the Galaxy A. Since last year, Samsung Electronics has been working on the mid-range phone market, with the first new features to be included in the Galaxy A series. In January of this year, the company unveiled the Galaxy S10 Lite and the Galaxy Note 10 Lite. Last year, Gartner evaluated samsung electronics’s successful improvement of mid-range and entry-level smartphones to achieve significant results.
However, with corona 19 shrinking this year, the importance of flagship products is emerging. This is because flagship products with higher yields than mid-range products with a focus on market share and sales are supported by the Corona 19 shock. In fact, Samsung Electronics maintained its profitability in the first quarter of this year, with smartphone sales decreasing, but increasing the share of premium and 5G models. Sales in the first quarter of the IM division in charge of Samsung Electronics’ smartphone business were KRW 26 trillion and operating profit was KRW 2.65 trillion. Sales decreased by 4% compared to the previous year, but operating profit increased to KRW 380 billion.
In particular, ultra-high-cost products such as the Galaxy S20 Ultra and Galaxy Z Flip, which are 1.6 million won, were introduced. In a conference call announcing its earnings on April 29, Samsung Electronics said that its flagship revenue, such as the Galaxy S20 Ultra and Galaxy Z Flip, helped maintain good profitability despite declining product sales.
Samsung Electronics plans to respond to corona 19 impacts with a variety of flagship and mid-range lineups. The company plans to expand its mid-range 5G phones to enhance the competitiveness of the entire smartphone lineup. Corona 19 is a strategy to preserve profitability as much as possible with its flagship products, and to maintain market share by minimizing sales decline through a competitive mid-range lineup.
LG Electronics is a top priority in deficit escape
Lg Electronics, on the other hand, said its top priority is to escape the deficit. The first priority is to reduce the deficit and accelerate the transition to surplus. To this end, LG Electronics consolidated its pyeongtaek smartphone production line in Pyeongtaek, Gyeonggi Province last year to Haiphong, Vietnam, and continues to improve its constitution, including platforming and modularization strategies, and cost reduction. This year, however, the Corona 19 crash edits a 20-quarter consecutive deficit.
Lg Electronics’ MC division in charge of smartphones recorded sales of KRW 998.6 billion and operating losses of KRW 237.8 billion in the first quarter. Sales decreased 24.4% compared to the previous quarter and 33.9% year-over-year. Operating profit increased to KRW 94.4 billion from the previous quarter and reduced the deficit, but the deficit increased by KRW 34.3 billion compared to the previous year. WITH only 2% of the world’s market share, LG Electronics needs to improve its current constitution rather than compete with its flagship lineup.
Therefore, lg electronics’s card this year is “Mass Premium”. It is a flagship dual ization strategy that offers an expensive premium of more than $1,000 for overseas markets, and a mass premium product at the lower price point in the domestic market. Overseas, as 5G market growth is expected this year, the market can afford to accept expensive prices, but it is not in Korea. Instead of chasing competitors with a single flagship, the company intends to tailor the product to local characteristics. This is why the V60 ThinkQ, which was released to the North American market in February, is not available in Korea.
In a conference call to the company’s earnings announcement on 29 July, LG Electronics explained its flagship smartphone strategy, “We are preparing a product that aims to increase the brand image and shift customer perception to customers seeking innovation and diversity at a price point of more than $1,000, and for the $599 to 999 product, we have outlined our lineup to reduce consumer burdens and absorb the growing 5G demand with mass premium products that are competitive in design and specification.”
The spearhead of the mass premium strategy is LG Velvet. Velvet is LG Electronics’ first smartphone brand with ‘G’ and ‘V’ tickets, and it is the product that puts the design ahead of the highest specifications. It is characterized by a water droplet camera and a symmetrical ellipse. The 6.8-inch large screen and 5G integrated chipset ‘Snapdragon 765′ and Samsung Electronics’ 48 million pixel image sensor are equipped. The factory price is KRW 899,800.
LG Electronics said in a earnings conference call, “Velvet is a design-enhanced product with reasonable features, and it is optimized from a consumer perspective, such as 3D arc design and 6.8-inch large-screen cinema full vision, and it is expected to be available in 5G advanced markets such as Korea, North America and Japan, and will help improve sales and profitability.”
LG Electronics is also looking forward to expanding the 5G market around the world. Velvet is also planning to strengthen its entry-level lineup to expand the 5G market. LG Electronics plans to increase the share of 5G smartphones from 13% last year to 30% this year.
Meanwhile, there are no plans to launch a folder phone this year. As the deficit in the smartphone business continues, the strategy is to focus on improving its constitution instead of plunging into uncertain markets. LG Electronics plans to respond to the folder phone with dual screens this year, just as it did last year. Velvet is also available with detachable dual-screen accessories.
In a conference call announcing its fourth quarter earnings earlier this year, LG Electronics said, “We are planning to launch a differentiated core product in 2021 to restore its market position and transform its virtuous business structure, even though technical verification has been completed, and will be released at a time when quality issues can be resolved and new value for customers.”