LG sees a brighter future in monitors

LG Electronics has set itself a target of 34% growth in the Gulf region this year. By concentrating on monitors and mobile phones, C.H. Lee believes they can reach it

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By  Caroline Denslow Published  May 29, 2005

|~|main_lee_ch_lg.jpg|~|C.H. Lee, the new president of LG’s Gulf Operations, is keen to expand the company’s revenue in both CRT and LCD monitors, especially in the re-export market.|~|Hoping to retain its stronghold in the consumer electronics sector, LG has reshuffled its management team and is pledging to localise more of its products. The company has appointed C. H. Lee as the new president of its Gulf operations. He takes over from P.C. Choi, who has moved to Iran where the company enjoys leadership position in the monitor space. LG has taken to itself to grow its revenue in the region this year, from US$2.1 billion to US$2.8 billion, a 34% growth over 2004. A challenging objective — even the company admits — but LG is banking on its monitor and mobile phone market to deliver such growth, together with its notebook business. Lee talks to IT Weekly about where the opportunities in the region lie for LG and why IBM was an important factor to its notebook business. You’ve just come in January, what are your immediate thoughts? How do you find the market in the Middle East? What are you looking to do here? Actually, I am very familiar with the Middle East. I have been in the region for more than ten years and came to Dubai last January. Compared to any other regions, such as North America or Latin America, or countries like China, we have more possibilities and potential here. The demand we have here comes from the fact that there are no local manufacturers related to our products. You have a strong monitor business in the Middle East, particularly in Iran. In Iran, there are many local manufacturers that used to belong to the government and have now been privatised for the past five years. It was allowed to bring commodities and other goods equivalent to US$100, but with the new free zones like the Kish Islands, a family is now allowed to bring goods in the Iranian territory, without paying any tax. This means that they are allowed to import televisions and audio units. Small items, like audio and video appliances, are very popular when people travel to Kish Islands. Is LG still considering the CRT business given the fact that you have a strong LCD market? Actually the Middle East market is very slow in adapting or accepting LCD monitors because, generally speaking, locals, including the government sector, have enough income to buy LCD monitors. There are still a very limited number of foreign employees in the UAE who are buying CRT monitors for their own purposes. Low-specification monitors that are still in strong demand are the 17-inch and 65-inch ones. The UAE is especially a good area for re-exporting products to other countries. What percentage is the re-export market here? Our re-export market also includes the GCC. We have our operations in Jebel Ali, where we have one distributor for the UAE market. Many of the dealers re-export to neighbouring countries, like African countries, North Africa in particular, and Pakistan. In the monitor market percentage-wise, 40% is for the local market and 60% is for the re-export market. As far as the mobile phone market is concerned, 20% is for the local market and 80% is for re-export. Compared to the CRT market, you said the adoption of LCD monitors was quite slow. What percentage of your sales are on LCDs? About 17% of our sales is for LCD monitors and 83% is for CRT monitors. What were your mobile phones sales last year? For the Middle East and Africa region, we have sold US$160 million in mobile phones, US$200 million for monitors, US$59 million for optical storage devices, and in PC and notebooks combined, it was US$25 million. Is your Flatron line doing very well? For the last five years we have invested a lot of funds for the development of the Flatron monitor. We also obtained a certificate from EDA that the Flatron is better in terms of viewing compared to a CRT monitor as there is less strain on the eyes. The China’s Doctors Association has certified that, too. LG has been making a lot of noise about its notebook business. You’ve been in the market for a couple of years now, so how do you rate your notebook business’ performance in the market? LG is one of the biggest suppliers to IBM. We entered Korea as LG-IBM, a joint venture, and our second notebook venture was with HP, when we became one of its major supplier. Two years ago we supplied the IMAC monitor to the airport. We have a very technology-oriented manufacturing unit in Korea including R&D, but unfortunately the LG brand was not built with an IT-oriented image. That’s the main reason why we started to re-export to other countries. We mainly concentrate on the domestic market, and now with a nice design the notebook was launched this year. We are only featuring on countries that have good brand names and origins. Volume- wise we are number two. In chain stores we are doing well but we see that we are getting weak in IT malls. It has only been about six months since we launched our model in this area so our business experience is short. However we have a good technology and design and I’m sure it will succeed in this area. You have been offering notebooks in this region for more than two years now? Yes, but it was a soft launch, and our models were introduced at Gitex. It is not a main frontline that we are concentrating. We were also hesitant whether we have enough capabilities to launch in a foreign country, so it was only from last year that our management decided to launch it. What sort of targets do you have for notebook sales? My target for the UAE and the GCC is 20,000 units; including the Middle East and Africa it is 100,000. That is almost US$90 million in sales for PCs and notebooks combined. Are you confident of achieving this target? Sure, we have recently realised that Koreans are really specialising in the notebook business and they will make a good relationship with the law and the channels. It will take time to make good communications with the customers, although there are lot of demands for corporate business. Where would you say LG’s strengths lie, do you see them being in the corporate market or the commercial? At this moment, our corporate and commercial markets are slow, but we have good distributors here, so they are handling PDP and the larger monitors sales, and they have good relation with the corporates. I am fully confident that we have a good corporate business here in Dubai, but in the other countries it is slow. American brands such as Dell, HP and IBM have already shifted their operations to Singapore and China. When they start re-exporting from China, which has low labour costs, maybe we will use the price effectiveness to our advantage, along with good name value. You said you had a manufacturing deal with IBM. When IBM transferred its PC operation in China, was your contract with IBM affected? Yes, the IT business is so different from the home appliances and home electronics business. Actually we have good technology, however our IT brand awareness is lower than Samsung. LG and Samsung both have a monopoly in Korea, but the value of the Samsung brand is higher in terms of the IT business, therefore to move ahead of Samsung we have a joint venture with IBM. However there are some difficulties in managing a joint venture company. Last year we tied up with IBM, but since we launched PCs and notebooks in the domestic market this year, we used the LG brand instead of LG-IBM. Are we going to see more notebooks being launched in this region this year? Last year we had five models. No new models were launched until July this month when we will release a new model. Next month we will display some models that are slim and narrow; the older models will be phased out. At the end of July we will see a new lineup of notebooks. Desktop PCs have already been lined up from last month and were introduced last year; three models have already been shipped out. What are your plans for the mobile phone market? This year, Nokia is the concrete leader with 60% market share in this area, followed by Samsung with 20% market share; the remaining 20% is distributed between Sony Ericsson, Siemens and the rest. We had 3% market share last year as we had limited models — about six models last year — but we will be introducing about 13 models this year. We will be introducing Bluetooth models this month. My idea is to make a difference in the marketing not only for the customers but also for the dealers. We already have promoters, merchandisers and distributors in this area, so my position will be involved deeply in selling out more. Our previous strategy relied more on the distribution market, but this time it’s not really enough so we have changed our strategy. In monitors our sales in this area is five times bigger compared to Samsung, but Samsung’s mobile phones sales is ten times more than LG. The mobile phone market is an important market in this region in terms of sales. The market too has changed a lot with the liberalisation in programmes and the different types of GSMs available, so is LG going to be working more closely with anything new? Actually we have a software facility in Bangalore, India and almost 280 engineers at the operations. Mobile phones are very much dependent on the software inside, so the country adaptation is carried out by our engineers. Once we receive a software confirmation, we distribute and test in each country. When is the 3G network actually launching? 3G was launched with limited services, now the information structure is being updated. There are about a thousand 3G lines. So are you working with other operators in the region? Vodafone in Cairo, and MTC Vodafone in Bahrain.||**||

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