LG profit falls amid weak TV demand Jul 24th 2013, 07:13
Press Association –
LG Electronics' latest quarterly report underlined challenges facing global electronics makers as weak TV demand and stiffer competition in smartphones undermine profit.
The results showed an 8% decline in April-June net profit to 155.5 billion won (£93 million) even as LG's revenue rose 10% from a year earlier to 15.2 trillion won (£9.1 billion). Operating profit fell 9& from a year earlier to 479 billion won (£287 million).
LG's TV sales improved a bit and smartphone sales hit a quarterly high of 12.1 million handsets. But that was not enough to create bigger profits as consumers snapped up cheaper devices that have lower margins for manufacturers. LG said sales of LCD TVs rose but soft TV demand combined with competition from rivals depressed TV prices.
LG's mobile unit is not a cash cow despite being the No 3 smartphone supplier. Its cheaper smartphones are popular but also burden the company with heavy marketing costs.
To improve its bottom line, LG is rolling out high-end models for its core TV and handset businesses in the current quarter. Earlier this week, LG began sales in the US market of curved TVs that cost 15,000 dollars (£9,770).
LG and Samsung, the world's two largest TV makers, have invested billions of dollars to make giant TVs with OLED screens, or organic light-emitting diodes, hoping to outclass the crispness and colour saturation of other TVs. But there are still challenges to successful OLED mass production, accounting for their high price.
On the smartphone side, LG is set to introduce the latest iteration of its flagship Optimus G series phone in the US in the summer. It will be the company's first new smartphone launch in several months. The company needs a "mega hit smartphone to dramatically raise its profit", said So Hyun-chul, an analyst at Shinhan Investment. That is the same challenge facing other top smartphone makers.
While Apple and Samsung cashed in on the initial explosive growth in smartphone use, impressing consumers with new smartphones has become harder as top handset makers offer similar hardware features. Growth is stalling in developed countries where smartphone use has reached saturation point. Emerging markets are still growing but the demand is for cheaper phones that are less profitable for the handset makers.
LG said its second-quarter smartphone sales increased thanks to demand for middle-tier smartphones.
On Tuesday, Apple reported lower quarterly earnings for the second straight quarter as it increased sales of older, less expensive models of the iPhone instead of the latest version.