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What’s Wrong With These People? #5 – LG

  • Living in Samsung's shadow
  • Beat Apple to touchscreens
  • Stable parent company can save mobile - for a while
Written by Adam Wajnberg
13/07/2012

This week, LG awoke from a year long slumber to announce an update to their flagship Optimus line, the L Series. With severely underpowered innards compared to Android phones from Samsung and HTC, it’s worth taking stock and asking if LG has anywhere to go but down – and then out of the mobile industry for good. Is LG still a legit maker of handheld tech? Were they ever much of a player to begin with?

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                                The Good Life                                                                                 goldstar

Like Nokia, LG is one of those companies that found a circuitous route to electronics. Whereas Nokia started making cables and ended up with network building (and gadgets to use them on), LG had its roots in heavy industry, originally as Lak-Hui Chemical Industrial in 1947. With South Korea entering the wider business world in the 50’s, Lak-Hui took advantage of the pronunciation of their Korean name to trade as ‘Lucky’ in the West, and perhaps as a mirror of the ‘Sunny’ boys over at Japan’s Sony. Lak Hui was started by Koo In-Hwoi, and the Koo family still runs the firm to this day.

The conglomerate bought out budget electronics firm Goldstar in 1958, to become Lucky-Goldstar. Goldstar was one of those post war “we do it all” firms, making everything from tractors to fridges. The new firm formed a chaebol, a uniquely Korean phenomenon, where a conglomerate is kept private and owned by a dynastic family, often skewing the wider political and economic landscape in a way that publicly traded companies can’t. As chaebols go, today’s LG is second only to Samsung, a company under whose shadow LG seems to be permanently shivering in.

But frankly, until recently both companies existed in stark contrast to Japanese electronics firms like Sony, Toshiba and Canon. Korean manufacturing  was seen as superior to Chinese and Taiwanese, but still short of the gold standard set by Japan.

Lucky-Goldstar changed their name to LG in 1995, and it was actually a clever Australian ad campaign that drew the ‘Life’s Good’ slogan to the fore. LG now uses ‘Life’s Good’ as the official explanation of the LG name for their international businesses.

                                  Emergence

The mid 90’s brought an increase in Chinese manufacturing, before turning into an all-out assault on the global economy at the turn of the millennia. In this period, Sony also started to wane, taking with it the perception of superior Japanese engineering (Toyota remained exemplar until a sudden collapse in reputation in the mid 2000’s). Korea’s chaebols were ready to distinguish themselves, in sharp contrast to China’s lack of quality control and Japan’s waning superiority. Samsung, LG and Hyundai all stepped up and started becoming more than just cheap alternatives to their Japanese counterparts.

                  zenith

LG made their first big score by buying out troubled US electronics firm Zenith Electronics, one of the great grand-daddys of radio and television. This gave LG a foothold in the TV business. Today, LG’s main electronics business is in the manufacture of flatscreen technologies, including plasma and LCD. Most panels made are generic LG stock, unless you’re specifically buying a Samsung or Sony.

LG branded well in kitchen appliances and other home entertainment (including DVD, Blu Ray and CD players), but they seemed happy to act as a second best to Samsung, maybe slightly above Teac, or provide the aftermarket with raw components.

                              Foray into mobile

                                           lg vx9000

                                                              Ahem.

With Sony entering the mobile game in a partnership with Ericsson, it was becoming clear to the Korean giants that mobiles were the place for big, conglomerate type firms to interface their brand in an intimate setting- the hand and pocket (yeah, I just wrote that sentence. I don’t like it either, but you just know someone said exactly this at a board meeting).

Samsung’s take was to compete directly with Nokia, by building a wide range of durable candy-bar devices packed with features. LG took a different avenue, seeking to build stylish handsets that matched their emerging reputation for clean lines in the rest of their electronics lineup. It, uh, didn’t work. LG remained marginal outside of South Korea, except when it came to CDMA in the US (CDMA in Australia, offered by Telstra between 1999 and 2007, didn’t feature too many LG phones).

It was in 2006 - 2007 that LG broke through, first with their VX8500 ‘Chocolate’ model, and then with the Viewty, a touchscreen phone with a 5MP camera, which would even now place it towards the front of the pack for cameraphones. It also did 30fps and even 120fps video recording for slo-mo playback. It ran a proprietary operating system built on Adobe Flash, on a capacitative touchscreen. It was the first mass market touchscreen phone. In 2007 the Viewty was so unbelievably overpowered that it seemed sure to be LG’s breakthrough model, just as the 5110 had been for Nokia, and the RAZR for Motorola. The Prada, a touch screen phone with Viewty-like insides and a Prada designed outside, cemented LG’s role as a good designer in light of Samsung’s love of chintzy plastic. Touchscreens and Good Design – let’s rock and roll, right?

                             lg pradalg viewty

                              Nothing could possibly stop us now! Full steam ahead!

 

                                         Drats

Imagine you had just discovered fire. A massive breakthrough in technology for you and your fellow cavemen. And then let’s say the next day, your neighbor Throg brought out the iPhone. That’s what happened to LG in 2007, only the fire was the Viewty/Prada touchscreen phone and the iPhone was the iPhone. LG must have been watching everyone go bananas over the “Jesus Phone” and would have had to pinch themselves several times over.

LG got the lawyers out, but it proved fruitless. The iPhone sported 8GB of storage, a full operating system and a store for buying 3rd party apps. The Viewty was a decent camera with a tiny bit of phone wrapped around it, one that had trouble allowing users to store more than 100 contacts. The Prada was the less-good version of the Viewty, and even its nice design paled in comparison to what Apple had just dropped. LG had just had their lunch stolen; and that lunch turned out to be so delicious that it made Apple the world’s fattest company.

So what do you do when you win the lottery and then get told the next day you’d actually NOT won the lottery and also that your house had just burned down? You get to making crap, if you’re LG. The next few attempts at clawing back some market share failed abysmally, as LGs product pipeline demonstrated that the Viewty project had claimed all their brainpower. A swathe of crappy handsets with nothin’-going-on came out, all a blur with one another.

The years 2008-2010 were wilderness years for everyone as the iPhone marched across the world, and Android just started to get its butt into gear. Samsung and HTC jumped from the hobbled Windows Mobile world and became early Android adopters, while LG languished on the quickly dying platform. It wasn’t until well into 2010 that LG finally coughed up an Android phone, the less-than-stellar Optimus One.

                                     Optimus

The Optimus line got off to a promising enough start. Across it’s (several) variants, the One sold about a million units before LG decided they had a winner. Finally they had a handset getting into people’s hands that otherwise showed off LG’s other strengths – camera, decent design and that’s about it. LG was languishing in Samsung’s shadow, as their fellow countrymen approached (and eventually overtook) Nokia as the world’s largest cellphone manufacturer.

LG released Windows Phone 7 flavoured Optimii as well, but they did about as well as other Windows Phones – which is to say, they collected dust. Elsewhere in the electronics world, LG was maintaining solid 2nd place status in televisions, fridges and washing machines. But in phones, they were looking up even at strugglers like RIM.

                                         Now

               lg evo 3d

 

LG’s overall electronics, chemicals, medical and other businesses are doing just fine, so they’re not like Sony. And unlike Nokia and RIM, mobiles aren’t their lifes-blood, so there’s no comparison to be drawn there. But phones are where many customers get to personally know the name of an electronics manufacturer, so it pays to be in the business. As Kenneth Hong, LG’s global director for corporate communications said to the Guardian in June 2012: “To not do phones would make us slow…it’s critical for our long term development”.

LG has been first in line to bring non-glasses 3D to mobile with the Evo, which is a pretty decent handset even without the gimmick. Their 4G/LTE handsets have been selling well in South Korea, where high speed mobile broadband is as ubiquitous as high speed fibre (*sigh*). Their product line has narrowed its focus, as have those at HTC and Samsung, to concentrate on just a few phones a year.

                          Is LG a bad company?

Nope. The mobile phone business doesn’t lose money – it still contributes some $10bn to the electronics bottom line. Their other divisions do well, and they seem committed to the long haul in mobile. They’re in a similar position to the one Samsung was in, in comparison to Sony about 15 years ago. Their current lineup and pipeline are not impressive; but they can drag their feet for a while. 3D will not be their savior, but they do own quite a bit of LTE technology.

LG have been quiet when it comes to legal and marketing shenanigans, and for that alone they deserve praise. Even Samsung have pulled some eye-rolling stunt advertising in front of Apple stores. LG have been diligently going about their business, waiting for an opportunity to strike. When Apple, with their patent trolling have exhausted everyone’s patience, Samsung have run out of variations on screen size  and HTC finally implode, expect LG to slip in with something good.

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