October 29, 2015
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Due to declining smartphone sales, LG Electronics is reporting a disappointing Q3 2015. Earlier today the Korean conglomerate issued its earnings report, which saw overall net income decline by 48% YoY to 83.7 billion won ($73.7 million). FactSec, a financial analytic company, had originally projected LG would boast 146.5 billion won ($129.1 million) in earnings. Total sales were down 5% to 14 trillion won ($12.3 billion) with operating profit falling 37 percent to 294 billion won ($259.1 million).

The sour results have a clear culprit, with mobile sales seeing a 77.6 billion won ($68.4 million) decrease despite shipping 15 million smartphones during this period. Sales of said devices were not attributed to high end models, with the OEM having a wide selection of affordable low and mid range offerings. The company remained optimistic that Q4 will prove more profitable thanks to sales from both the V10 flagship and the new Nexus 5X hardware.

The positive news to be found was the fact, for the first time in three quarters, LG’s TV business made a profit. In the end, over 80% of total Q3 profit was generated by the company’s home appliance division, responsible for washing machines and refrigerators. Overall, LG earned $109 million in profit, but it certainly was not its mobile efforts that it had to thank for that.

 

LG V10 Hands On-25

Analysis

LG had arguably been anticipating these poor earnings given the fact it held an emergency meeting several weeks ago to discuss cross-company patent sharing. Shortly thereafter, The Korea Times published a story that LG Display will soon take control of OLED lighting-related development from current owner LG Chem. This past summer as well, LG Display invested $1 billion in flexible OLED development,  in a report that claims it got a sizable investment from an “unknown” American company, widely believed to be Microsoft.

The new “must haves”

While both the V10 and Nexus 5X  have received solid reviews, the former has already seen a poor sales start in its home market. Several overseas carriers will soon be offering the V10, however given its high price point and limited spec-superiority over the significantly reduced G4, it may have a tough road ahead.

Despite the very vocal outcry of support for LG’s commitment to support expandable storage via microSD as well as user-replaceable batteries, the sales aren’t speaking for themselves. While the V10 has some interesting features such as relatively high durability, an integrated fingerprint sensor, and a second screen ticker, it’s releasing dangerously close to a major hardware refresh expected to start in Q1 2016.

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The Nexus 5X meanwhile, continues to be readily available while the Huawei-produced 6P is sold out in multiple markets. This could have a net-positive effect with customers eager to get new hardware going for LG, and/or it could be an indication that the supply shortages with prior year’s LG Nexus devices have been ironed out. At the same time, the phenomenon might be a result of a clear preference for the 6P and/or a sense that the 5X fails to bring enough spec-value for the money, especially considering international pricing.

 Are you surprised to see LG struggling with its mobile division? Can its most recent efforts help turn things around?

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