​LG's mobile business is ripe for an overhaul

LG's G5 sales have been less than spectacular, putting pressure on its mobile business further to find a way out of peril. Perhaps it is time for a radical, fundamental overhaul of the business to create an organisation that can deliver consumers practical innovations instead of flashy gimmicks.

The modular G5 succeeded in getting LG Electronics a thumbs up for bravery and innovation. It was a radical decision to launch a modular phone -- "partly" modular to be precise -- in a saturated market where even leaders Apple and Samsung are scrapping to protect their bottom line.

But it seems, sadly, the mobile business will see another decline in its bottom line for the second quarter of the year. According to company insiders, LG has, up to now, only sold half of what it expected from the G5 initially. Its older models -- the G4 and the V10 -- despite the dropping of prices, have also missed the mark on projected sales targets both in the US and South Korea.

Analysts, who initially praised the G5 and expected it to be the firm's best selling phone, have all now downgraded their expectations. Hana Financial Investment, in a note to clients, said it lowered expected sales of the G5 for the second quarter to 2.5 million from its initial 3 million. For the year, the phone will also sell 7 million, not the 9 million it projected. The mobile business will post an operating loss of 129.9 billion won ($112 million), and fail to turn to the black, it said.

The pressure is heavy. Much is riding on the V series, LG's answer to Samsung's Note series that will be launched in the second half of the year. According to company insiders, the V series will likely not go modular, despite president Juno Cho telling reporters earlier that the modular concept will continue for future phones. Though he could mean the G6, a non-modular V series phone will seriously put the concept's future in doubt.

LG tried hardware-tweaking before the G5. For the G4, it adopted a leather back cover. It retained removable battery -- which Samsung gave up. Despite the many "thank yous" from die-hard fans of the removable battery feature and the leather back cover, sales did not back up the efforts.

The reality is the smartphone business is no longer hardware driven, but idea driven. If Samsung indeed launches foldable phones next year as rumour suggests, as ZDNet points out, finding the use case will be the real innovation. Hardware is there to help the idea. The right amount of hardware innovation -- if hardware is everything, how do you explain Apple? -- and an idea, or concept, that is practical and can give consumers long-lasting benefits seems more the key than drop-my-jaw radicalism in innovation.

It will be a long time before LG can catch up in software to Apple -- Cupertino's biggest strength is that its software is not necessarily flashy or eye-grabbing, but that it is there to serve a purpose: to make it easier for consumers to use their iPhones.

LG has the heft to continue on smartphones despite its losses. Its home appliance business continues to make sure the firm's overall bottom line remains in the black. It is the second-largest vendor of TVs in the world, and arguably the world's number one in terms of technology. The firm's affiliates LG Display and LG Chem boast world-class technology from bendable screens to long-lasting batteries.

And LG has no intention of backing out of the mobile business. According to company insiders, the leadership considers it a matter of pride to continue, and despite market setbacks, the confidence is still there. Their pride is understandable, because in the feature phone age, LG stood an arm's-length from rivals such as Samsung, Nokia, and Motorola.

The hardware prowess is there. And from my personal experience, there are some wonderfully smart people in LG. What they need is an organisational restructuring that backs up their ideas, putting them atop their world-class hardware. Whether it be in AR or VR, LG can bide their time so that when the market is ripe, they can infuse its mobile business with rising new technology that will not make their years of efforts in vain.