SEOUL (Reuters) - LG Electronics Inc, the world's No.3 mobile phone maker, aims to increase its global market share to at least 10 percent this year and boost low-cost phone sales, the head of its handset business said.
As shrinking consumer demand hits the mobile industry, LG expects deteriorating profits this year, but still targets a high single-digit percent profit margin on mobiles, against 11 percent in 2008, said Skott Ahn, President and CEO of Mobile Communications at LG.
Developed markets will definitely suffer some contraction, but there's a chance for growth in first-time buyers in emerging markets, Ahn said.
He said LG was aiming to sell more than 100 million handsets this year. It sold 100.7 million mobiles in 2008, beating Motorola Inc by a slight margin to rank behind Nokia and Samsung Electronics Co Ltd, and claim about 8.5 percent of the global market.
We will be able to meet our market share goal (of 10 percent) if we can maintain our sales volume at last year's level, Ahn said, adding the targets assumed the global mobile phone market would decline about 10 percent in 2009.
The comments were made at a news conference in Seoul ahead of the Mobile World Congress (MWC) in Barcelona.
Samsung, which is also attending the mobile fair, reiterated at a press briefing that it aimed to sell more than 200 million handsets this year, pushing up its global market share to at least 20 percent from about 16 percent in 2008.
Samsung also hopes to post a double-digit percent operating profit margin at its telecom business, spokesman Ahn Jae-kwang said. The company posted a 9 percent profit margin in 2008.
Strategy Analytics forecast the global cellphone market to shrink by 9 percent in 2009, its first decline since 2001. The outlook is especially grim for the first half as shipments slow after year-end holidays in developed markets.
A decline in profit margins looks inevitable, although smartphone sales can make up for some of the revenue shortfalls caused by selling more cheap phones, said Kim Ik-sang, analyst at HI Investment & Securities in Seoul.
Kim expects Samsung and LG to post 6-7 percent profit margins on their mobile phone businesses this year. In the downturn, the best they can do is minimize handset price falls and cement their market share.
LG will also have to focus more on low-end phones, priced at $100 and below, to grow in the shrinking overall market. Ahn said the South Korean firm planned to boost sales of low-cost phones by around a fifth this year.
In 2008, high-end phones, sold at $200 or higher, represented about 80 percent of LG's handset revenue.
However, LG will stay away from the very low-end category of $20 or lower handsets, and offer affordable mass-market models that still provide the feel of premium phones, Ahn added.
We are still in the stage of building up our brand in emerging markets, he said. And we still want to avoid price competition.
LG is also boosting its smartphone lineup to strengthen its presence in the promising market segment, currently led by Apple Inc's iPhone and the Blackberry from Research In Motion. LG plans to roll out about 10 new smartphone models this year, up from three unveiled in 2008, Ahn said.
Smartphones are mobiles with PC-like functionality, which run an operating system and can adopt various applications on top of advanced features such as wireless Internet.
In the long term, LG wants to become No.2 in the global mobile market in 3-4 years, Ahn said, adding: I doubt whether No.3 would still be there 3-4 years later.
Ahn said the current downturn and emerging players such as Apple were changing the landscape of the industry, and a few struggling players could disappear.
Slumping demand has begun to bite mobile makers in the last quarter, with Sony Ericsson and Motorola posting operating losses on phones and three of the top five players reporting lower shipments.
Only Samsung and LG sold more phones and gained market share in October-December, but their margins suffered as a result.
By 0214 GMT, LG shares were down 0.5 percent, compared with a 0.2 percent gain in the Seoul stock market. Samsung was up 0.8 percent.
(Additional reporting by Marie-France Han; Editing by Jonathan Hopfner & Ian Geoghegan)