I don’t follow the world of tech as fervently as I did back in college, which is a shame, really. Back then, I followed with such fervor because it felt like every day something was happening in the industry, where one smartphone release would be trounced 2 weeks later by a rival manufacturer with better specs. It was the wild west, just waiting to be tamed. And then, sometime in the past 2 years, everything seemed to hit a plateau. Computer performance across all industries seemed to slow down rather dramatically (either that or we’ve reached a threshold for performance past which we can’t tell the difference), which made the whole industry seem rather dull.
Boy, am I wrong.
This latest story out of one of the world’s biggest name in tech is proof that a plateau for any industry is an opportunity for businesses to do the dramatic. And LG seems to be taking this chance in stride.
Actually, it gets better than that. LG is looking to scrap its G series entirely, as it looks to turn around the ailing business unit, which has failed to turn a profit in the past 11 consecutive quarters. That’s not to say they were any better when they were making a profit. That would be Q1 2015, when they made 1.2 cents per phone sold.
The general consensus, at the moment, is that LG will be bringing a midcycle refresh to its popular V30 smartphone, dubbed the V30+, with enhanced AI abilities. Whether this new AI capability is based on increased Google Assistant integration or an entirely different endeavor remains to be seen. There have also been, what seems like, rebranding efforts, as the company was recently found trademarking the terms “Icon” and “Iconic”.
All of this as the company’s vice chairman, Cho Sung-jin, told reporters, “We will unveil new smartphones when it is needed. But we will not launch it just because other rivals do.”
All of this seems to signal a few things from the company. First, and probably the most obvious, is that LG is admitting that the unit as a whole is struggling. This isn’t an easy acknowledgement to make for LG, either. Back in its heyday, when feature phones were in vogue, LG was in a solid 5th place position, with healthy margins, especially with the success of its high end feature phones like the LG Chocolate line.
To admit defeat, especially to domestic rival Samsung, is a tough pill to swallow. But it’s one that LG was unwilling to take until now. Which is why LG was so open about experimenting with its smartphone designs, going so far as to introduce self healing coating in one model it introduced back in 2015.
Second, the company is signaling to consumers that, at least in its view, technological progress has slowed down (or has passed that psychological threshold where people can’t tell the difference) that annual updates are unnecessary. This admission is an interesting one, especially because it’s not one Apple or Samsung is willing to make. This ties back to how LG’s smartphone business isn’t doing to hot. If LG’s business was turning a healthy profit on its smartphone business, it would have an incentive to get people to buy yearly updates. That’s the situation Samsung and Apple are in. But, as it stands, LG has more incentive to do the opposite, to disengage consumers from the industry a bit, cool off consumer interest, and break the tie between them and their brands.
But the aforementioned statement from the vice chairman is probably the most revealing about the company, and what really gets me excited about this hiatus of LG from the smartphone industry.
LG: Life’s Good?
LG might be trying to pull a GE maneuver here. The statement, as a whole, is stating, rather bluntly, that the LG smartphone division will not be given the resources it has now. In short — cutbacks. LG’s looking to scale back, perhaps even looking to eliminate the unit altogether at a future point in time.
Later on in the same Korean Herald article, they go on to write about robots and AI, as it pertains to LG’s business, and its showing at CES. That’s the answer to the question asked in the quote given by the vice chairman. LG will shrink its smartphone efforts, and reallocate the resources to other businesses. Which businesses? Robotics and AI.
In fact, he makes another quote. When asked about technologies LG is lacking in relation to robotics and AI, Cho said, “We plan to acquire small companies and invest in related business.”
Here’s what to expect, then, in the coming years. LG’s focus on hardware, especially smartphone hardware, will shrink. They’ll scale back everything, starting with the marketing budget, but eventually moving to the R&D budget as well. This capital will be allocated, based on Cho’s statements, to its other divisions, but there’s reason to expect LG’s venture and M&A divisions will get a bulk of that cash. They’ll make strategic investments and acquisitions with a focus on robotics and AI.
Take this analysis a bit further, and we can expect LG to double down on home appliances, a traditional stronghold for LG. You can expect LG to integrate AI and robotics into future home appliances, culminating in its vision for the smart home. For LG, a smartphone isn’t necessary for this vision to succeed. In fact, it’s best if the company is agnostic to any ecosystem.
LG’s looking to prevent further tarnishing of its brand by paltry sales figures of its smartphone business. LG’s looking to consolidate and focus their holdings on a few core business units, just like Sony in recent years. Except, unlike Sony, they’re looking to soften the blow by winding down businesses over time, rather than put them up for sale.
Whether this strategy will succeed, or not, only time will tell. All I can say, for now, is that life only gets better after the hard times pass by.