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Last updated: October 26, 2005 4:25 pm

LG targets double share in handsets

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South Korea’s LG Electronics aims to double its share of the global handset market to 14 per cent over the next two years, by focusing on mobile phones using the GSM standard.

LG is one of the fastest growing handset makers, overtaking Sony-Ericsson as the world’s fourth-largest mobile phone maker late last year. It is the world’s second-largest producer of 3G mobile phones.

The company hopes to increase handset sales to 100m units in 2007 from an estimated 55m units this year. The global market is expected to grow to about 915m units from 780m.

The aggressive sales target comes after LG’s market share fell and profit margins weakened this year amid intensifying competition, with rivals Nokia and Motorola fighting back with lower pricing.

“We have always grown faster than the overall market and we will continue our efforts to beat the market growth rate,” said Bae Jae-hoon, vice-president of the company’s mobile communications business.

He said LG would focus on the GSM market, the dominant standard in Europe, to drive growth. It plans to increase the portion of GSM and W-CDMA phones to 56 per cent of its overall sales by 2007 from 44 per cent this year.

Analysts expect LG to cut prices to take market share from its competitors, with growth expected to come from lower-end demand in emerging markets.

“LG has room to cut prices further,” said Noh Geun-chang at Korea Investment & Securities, pointing out that LG’s average selling prices were $20 lower than Samsung’s, while Nokia’s were $50 lower.

But Mr Bae said LG would stick to its strategy of maintaining its premium brand image and avoiding price wars, stressing that profitability would improve in the fourth quarter.

LG’s handset business, which takes up 38 per cent of its revenue, suffered its first operating loss in the second quarter but returned to the black in the third quarter, reporting a margin of 5.4 per cent.

Analysts expect LG to benefit from rising 3G demand next year, but still described its sales target as ambitious. “It won’t be easy for LG to take market share from the top three makers because they are not idly sitting around,” said Sun Chung at Nomura Securities.

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