LG’s woeful comeback attempt

LG Comeback Failure

Back in 2008, Samsung (005930) and LG (06657011) were battling head to head in North America and Europe. Now Samsung is heading for 29% global handset market share for 2012, while LG is tumbling to 4%. After a long and depressing spiral, LG has staged a fairly aggressive come-back attempt in the end of 2012. Sadly enough, the bid for relevance seems to be coming undone.

Perhaps the most visible part of LG’s rebound effort is Nexus 4 — the sleek quad-core Android phone that was supposed to be a hot Christmas item in Europe and North America due to its reasonable price and hot display tech. But production problems have hampered the Nexus 4 roll-out badly, leading to the first shipment selling out in half an hour in the United Kingdom and Canadian retailers offering four-to-seven week shipping estimates at the end of November. The resulting friction between Google (GOOG) and LG has now led to an ominously snippy comment from Google’s United Kingdom and Ireland Managing Director Dan Cobley: “Supplies from the manufacturer are scarce and erratic, and our communication has been flawed.” This does not bode well for the Google-LG relationship in 2013.

LG’s recent strategy for its high-end models resembles HTC (2498) approach: price them like Samsung and hope for the best. The results have been similarly devastating to both brands. The LG L9 costs a bizarre 23,000 rupees in India, where the cheapest iPhone is now 26,000 rupees. While Nokia (NOK) and Samsung wage war in the 4,000 to 7,000 rupee smartphone price bracket, LG is putting a lot of effort to compete directly with the iPhone and Galaxy S III. Whereas HTC is finally catching a wave in  Europe with its cheap new Windows model 8S, LG has opted to stay in the brutally competitive Android arena.

Of course, LG still competes also in the low-end market. But the one-time champion of the cheap smartphone niche is being squeezed hard by the Chinese vendors Huawei and ZTE. LG’s pivotal low-end model for 2012 is L3. Its prepaid price in the U.K. has started drifting towards the £50 mark, pushed there by tepid consumer interest.

Two years ago getting a decent touch screen smartphone for £50 would have been a sensation. But the Chinese vendors have been moving aggressively down the price ladder while improving build quality rapidly. Comparisons to Chinese cheapie models have been tough on LG. “Tiny, awfully low-res screen… creaky, scratch-prone body… glitchy software… underwhelming hardware,” concluded a cruel CNET UK analysis of the L3. The Chinese are raising the bar in the bargain basement category too rapidly for LG to keep up.

So here is the one-time close rival of Samsung: losing ground to Chinese at the low-end; blown out of the water at the high-end by Galaxy S III and iPhone 5; botching the crucial mid-range Nexus 4 roll-out. HTC is now showing some glimmers of a turnaround, but LG remains on the Siemens express to phone brand oblivion.

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