LG: New Camera Phone, New Hopes

Fresh off the success of the Chocolate phone, the Korean handset maker kicks off its plan to seize more global market share with the multimedia Viewty

by Moon Ihlwan

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Could LG Electronics (LGEJY) make yet another splash in the ever-evolving mobile-phone industry? The South Korean company has long taken a back seat to local rival Samsung Electronics (SSNGY) in the handset business, but it has been rolling out a series of sleek and slim phones in the past year and a half that are creating far more buzz than anything from Samsung. Now Skott Ahn, president of LG's handset division, says the company is poised to begin making a foray into a new feature-rich segment. On Aug. 31, at the annual consumer-electronics trade fair IFA in Berlin, LG will unveil what its executives believe is the mother of all camera phones. "We are confident that there's no other camera phone on the planet that's really comparable with our new phone," says Ahn.

Certainly LG is not the first to try to strike it big by offering a multimedia phone laden with all sorts of features. In this era of digital convergence, Nokia (NOK), Samsung, Sony Ericsson, and recently Apple (AAPL) have all turned their handsets into entertainment hubs on the go. Yet executives at LG, the world's fifth-largest mobile-phone maker, think no company has come up with a phone that could truly replace a stand-alone digital camera—until now.

The new LG handset, called the "Viewty," aims to give maximum satisfaction to shutterbugs keen to share photos and videos with others. LG has formed an alliance with Google's (GOOG) YouTube, for instance, and with just one click, a Viewty user can upload a video recorded on the handset directly to YouTube. A Viewty user can also watch YouTube videos on the handset. "The reason for us to go first for camera-related features is simple. Images and videos are the hottest contents among trend-setters," says Ahn.

Cool-Design Strategy Succeeds

The new camera phone is part of LG's push to become a global power in handsets. The company was a latecomer to mobile phones as it initially focused more on network equipment. So in 2004, when LG decided to try to make up for lost time, the company needed to build up its brand image to grab eyeballs and drive sales. After three years of intensive surveys that involved thousands of consumers in some 10 countries, LG concluded it would first place heavy emphasis on cool design to bring out phones that users will clamor to own.

That strategy is paying off. Its Chocolate phone, launched last year, was the first LG product to meet the company's new high-design standards. (LG awards "Black Label" status to phones with outstanding design.) The Chocolate has been a runaway success. LG has sold well over 13 million Chocolate phones since its global debut in May, 2006 (see BusinessWeek.com, 7/19/06, "LG's Chocolate: Will This Cell Phone Hit the Sweet Spot?").

The Chocolate and LG's second Black Label phone, the Shine (its face and back are finished with shiny stainless steel), have turned around LG's money-losing cell-phone business. In February, LG also launched a co-branded handset with Italian design house Prada. Its handset division reported a profit of $332 million in the second quarter of this year, against a loss of $16 million a year earlier. Its phone profit margin jumped to 11.6% in the quarter, up from 4.7% in the first quarter and –0.7% a year earlier. The company forecast phone shipments will rise to 78 million units for all of this year, up from 64.4 million last year.