LG is pinning its hopes on ODM strategy to boost sales and remain relevant.
The reduced production cost will help LG price its phones competitively and boost shipments
LG's smartphone business has been on a downward spiral for quite some time, and the ever-increasing pressure from Chinese rivals has done it no favours. In a bid to revive the sales and boost the shipment figures, LG has announced that the company is expanding its dependence on the ODM (Original Design Manufacturer) business model for its mid-range smartphones as well, with the objective of keeping the price of LG-branded phones competitive. LG has already gone the ODM route for its low-end smartphones, and is now looking to do the same for its mid-range phones to strengthen its ailing smartphone business.
Jae-Seok Shin, Head of the Project Management Team at LG Electronics' Mobile Communications Division, revealed the plans of LG's increased reliance on the ODM model at a conference call where the company announced the Q3 financial results. “We will use the ODM as a lever for improving the cost structure of the smartphone business. We have been making efforts to raise cost competitiveness by reducing fixed costs and optimising production sites. We will expand the application of ODM from existing low-end smartphones to mid-range phones,” Shin was quoted as saying by South Korea-based The Elec.
The LG executive added that the company's plan to bring its mid-range phone lineup under the ODM model is aimed at improving the cost structure of its mobile business. He added that the move will help the company raise cost competitiveness by bringing down fixed costs and simultaneously optimising production sites. The core objective is to cut production cost and be in a position where the company can price its mid-range phones as competitively as the rivals, thereby boosting the market uptake of LG-branded phones.
In addition to adopting a different business strategy for mid-range phones moving forward, LG is also actively working with Qualcomm to get an early lead in the 5G smartphone segment. LG plans to offer its high-end 5G phones at the same price as its existing premium 4G phones, and also aims to bring 5G-ready mid-range phones in the market before the first half of 2020 comes to an end. It is quite evident at this point that LG is pinning its hopes on the ODM business model and 5G phones to execute a turnaround of sorts.
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