LG’s new G5 smartphone getting a run-through in Barcelona this week. ENLARGE
LG’s new G5 smartphone getting a run-through in Barcelona this week. PHOTO: JOAN CROS/NURPHOTO/ZUMA PRESS
By MIN-JEONG LEE in Seoul and JONATHAN CHENG in Barcelona
Feb. 24, 2016 12:05 a.m. ET
After several years lost in the shuffle of Android handset makers, LG Electronics Inc. is giving up on the China market and is making a renewed push in the U.S. with a high-end flagship smartphone, in a bid to regain the No. 3 spot in the global market.
LG’s G5 smartphone, launched on the sidelines of the Mobile World Congress in Barcelona, has won plaudits from industry critics for its radically difference design, bolstering investor hopes that the South Korean company may have found its hit phone.
LG needs a best-seller. Its mobile unit has posted losses for the past two quarters.
The metal-framed G5 has a modular design that allows users to easily swap in accessories like a camera pack with an optical zoom, a high-fidelity audio booster or an extra battery. LG is planning simultaneous launches in the U.S., Europe and South Korea, working with 200 carrier partners when the phone goes on sale in April, company executives said.
The cost of the phone hasn’t been released yet.
“We want to give it a big drive this time, setting aside more budget for marketing than we could probably afford,” said Juno Cho, LG’s mobile chief, without disclosing specific figures. Mr. Cho was named LG’s mobile chief at the end of 2014, primarily because of his experience in the U.S. He spent four years as an executive involved in setting business strategies for LG’s North American operations.
LG has a lot of catching up to do. Last year, it ranked sixth in the global smartphone market with a 5.3% market share, behind market leader Samsung Electronics Co., Apple Inc. and a trio of Chinese smartphone makers—Huawei Technologies Co., Lenovo Group Ltd. and Xiaomi Corp., according to data tracker TrendForce. It ranked third globally in early 2013, but was eventually toppled by Huawei.
LG now sees an opportunity to challenge Huawei for the No. 3 spot with differentiated devices. Analysts estimate that LG could ship more than 10 million units of the G5 this year; while modest compared with expected sales for Samsung’s Galaxy S7—some analysts estimate about 40 million for the Galaxy phone—it would be a record for LG.
“Now that smartphones have fully penetrated the market, it’s so hard to impress the consumer, and the G5 can do that,” said Jefferson Wang, senior partner at Philadelphia-based IBB Consulting Group. “They’ve hit the areas that are traditionally important for the consumer: photos and music.”
If the device takes off, LG could also benefit from sales of accessories, which have juicier profit margins, analysts say.
Reflecting its ambitions, LG eschewed its usual sort of launch venue—a modest hotel conference room on the sidelines of Mobile World Congress—in favor of a hillside hall the size of an airplane hangar. In another break from its usual practice, it held its event just hours before Samsung’s, and in direct competition with Huawei’s conference.
Committing to a bigger marketing budget could make LG a key partner for U.S. carriers, which are looking for fresh products to drive excitement and typically pour in marketing dollars alongside handset manufacturers, said Jeff Fieldhack, a Rancho Santa Fe, Calif.-based research director for Counterpoint Technology Market Research.
Spending big on advertising could help LG grab market share from struggling handset makers like HTC Corp., Sony Corp. and Microsoft Corp., Mr. Fieldhack added.
LG’s Mr. Cho concedes that marketing could take a toll on the company’s bottom line.
But company executives say that with a potential hit smartphone on its hands, now is the time for LG to be aggressive.
Late last year, LG introduced the V10 smartphone in the U.S.
To play up the device’s video-shooting features to consumers in their 20s and 30s, it hired actor Joseph Gordon-Levitt to promote the phone.
Thanks in part to these efforts, LG’s smartphone shipments in the U.S. market rose to 13% in the last three months of 2015, according to research firm Counterpoint.
That marked a strong increase for LG from a year earlier. Despite its progress, challenges still abound.
The company has backpedaled from China, the world’s largest smartphone market, amid stiff competition.
LG’s China sales accounted for 6% of the company’s total revenue, including sales of televisions and home appliances, during the first three quarters of 2015. This compares with 28% for North America and 26% for South Korea during the same period.
“China is a very brand-sensitive market, and it requires huge retail costs in the early stages to push products,” Mr. Cho said.
Its focus on the U.S. also comes as other Chinese makers like Huawei are eyeing the market.
LG is also pushing into other segments such as phone accessories, including a lightweight virtual-reality headset, a 360-degree camera and a rolling robot that can serve as a real-time surveillance camera for the home.