NEW ORLEANS, United States-John Koo and his top executive team crowd a small, air-conditioned room perched atop LG Electronics’ sprawling booth at the CTIA trade show here. Relaxed, smiling, Koo has shed the suit coat he wore during his keynote appearance to reveal a pale, striped shirt and his trademark suspenders. As chairman and chief executive officer (CEO) of LG Electronics, Koo has plenty of reason for good humor-only 10 years after entering the mobile-phone market, his company is poised to capture the industry’s number-five slot.
“The number-five spot is something we think about and we target for,” Koo said. But entering the top five and joining the likes of Nokia, Motorola, Siemens and archrival Samsung Electronics is only part of the company’s goals. Koo said LG Electronics is embarking on a new branding campaign aimed at making LG a household name and is in the midst of developing a new home network concept, dubbed DreamLG. Koo and his team said DreamLG will make the mobile phone the center of a wireless household.
“The handset is no longer just a handset,” Koo said, explaining LG’s vision of the future of the wireless industry. “We have made handsets the top priority in our business.”
LG Electronics is the appliance arm of LG Group based in Seoul, South Korea, the world’s 15th-largest company based on gross revenue. The group employs more than 140,000 worldwide and counted US$95 billion in revenue last year. Koo, a member of one of the two families that founded the company in the 1950s, first started working for LG’s Hong Kong and Singapore offices in 1973, shortly after graduating from Princeton University with an economics degree. Working through the ranks of LG Electronics, Koo was appointed the company’s head in 1999.
Surrounded by his executive team in LG’s CTIA meeting room, Koo doesn’t come across as the head of a multibillion-dollar Korean electronics company. He freely gives out his business card. He likes basketball and competes against professional Baduk players. (Baduk, also called Weiqi or Go, is an ancient Chinese strategy game.) He has his own Web site, www.digital-ceo.com. He wears red suspenders.
But in discussions over wireless, Koo’s position becomes evident. He admits LG Electronics is a latecomer to the wireless handset business, but his demeanor and his team’s confidence suggest such challenges can be overcome.
“We still think we can play this game,” Koo said.
Indeed, Koo asserts that mobile phones have become a central part of LG Electronics’ business, which spans everything from TVs to DVD players to PC monitors to refrigerators to air conditioners to washing machines. Under the DreamLG concept, Koo said LG Electronics is working to connect its diverse product lines using wireless technology. For example, LG phone users could switch on their LG washing machines from their offices with a flick of a phone keypad. Koo said such a move would leverage the company’s vast manufacturing business and help increase sales in each area, as well as expand the wireless industry. LG is already selling such services through its Korean carrier partners, SK Telecom and KTF, and plans a similar move in the United States. Such a strategy is not without competitors, however-Microsoft has floated a similar concept.
Further, Koo said LG this year and next will launch its own branding effort. All the company’s appliances are getting redesigned to include the LG brand, and the company recently consolidated its advertising efforts into one agency to generate a more consistent message. Koo said a major branding push will coincide with next year’s Consumer Electronics Show.
But successes and profits are not the only motivation for Koo and his team. As any basketball fan or Baduk player can attest, much of the competitive drive comes not from accomplishment but from competition. And though there are few that can compete with LG Electronics on such a grand scale, there is one that is doing just that-and right in LG’s backyard.
“It tends to be leading technology in Korea,” said Woo Hyun Paik, LG Electronics’ president and chief technology officer.
Samsung, Korea’s other electronics giant, competes with LG in virtually every corner of the consumer electronics market. The two are neck-and-neck in many areas, although Samsung got an early start in the mobile-phone business. Partly as a result, Samsung’s brand is much stronger in the United States, for example.
“Traditionally, the two companies have a lot of commonalties,” Koo said. “It’s a healthy rivalry.”
Koo said the longtime, heated rivalry ensures that Korea remains a hotbed of innovation. He said the two companies have helped to drive each other to great lengths to capture business.
“This makes for a very challenging environment, but very interesting,” Koo said.
The same can be said for the handset industry. LG expects to sell 23 million handsets worldwide this year, up from the 16 million the company sold last year. Koo and his team said much of that growth will come from sales of GSM phones-the company, based in CDMA-stronghold Korea, is working to expand its GSM lineup-as well as from color screens and integrated cameras. Koo said India, China and Russia represent the greatest growth areas, and that LG plans to do most of its expanding organically.
Koo shrugged off the idea of LG partnering or merging with another mobile-phone company, explaining that in the current economic environment “there’s a risk that we would meet the wrong partner.”
“These days you have to be very careful,” he said.
However, that doesn’t preclude LG from partnering with an operating system provider, which to date the company has shied away from. The strategy marks a definite break from rival Samsung, which has so far used virtually all the available mobile-phone operating systems (OS).
“That issue has become a hot issue,” LG’s Paik said of the operating system battle. “Now it’s going to become an interesting issue.”
Paik said LG has not yet decided to go with Palm, Symbian, Microsoft or any other high-end operating system, but said the company is leaning toward Microsoft. LG makes the Hewlett-Packard (HP) iPAQ personal digital assistant (PDA) with Microsoft’s software.
“We feel comfortable using the Pocket PC OS,” Paik said, adding, “we’re not opposed to any particular options.”
Regardless of which OS the company chooses, LG is still likely to make a significant dent in the worldwide mobile-phone market. Analysts have said carriers are looking to supplant Nokia’s dominance with phones from other manufacturers, and LG is well placed to offer an alternative. Indeed, LG along with Samsung and other Korean, Japanese and Chinese manufacturers, have fallen under the “Asian invasion” tag, as carriers outside of Asia look to replicate the successes of operators like NTT DoCoMo and others.
“European carriers who have invested in MMS infrastructure are now desperate to put cameras into subscribers’ hands,” said David Chamberlain of analyst firm Probe Research. “While European and U.S. vendors were producing handsets offering only voice and SMS, Japanese and Korean companies used the past couple years to develop a thick portfolio of mature imaging terminals. Those new handsets suddenly look very attractive to wireless carriers needing to entice users to use their new networks and MMS systems.”
And if such a situation plays out to the benefit of LG, Koo’s suspenders may well become the standard. GW
