LG to Grow Market Share on Low-Cost Phones

LG Electronics, the world's No. 3 mobile phone maker, aims to increase its global market share to 10 percent or higher this year and boost low-cost phone sales, the head of its handset business said.

As shrinking consumer demand hits the cellphone industry, LG expects deteriorating profits this year but is still targeting a high-single-digit percent profit margin on mobile phones, compared with 11 percent in 2008, said Skott Ahn, President and CEO of Mobile Communications at LG.

"Developed markets will definitely suffer some contraction, but there's a chance for growth in first-time buyers in emerging markets," Ahn said.

He said LG was aiming to sell more than 100 million handsets this year. It sold 100.7 million mobile phones in 2008, beating Motorola by a slight margin to rank behind Nokia and Samsung Electronics, and claim about 8.5 percent of the global market.

"We will be able to meet our market share goal (of 10 percent) if we can maintain our sales volume at last year's level," he said, adding the targets assumed the global mobile phone market would decline about 10 percent in 2009.

Ahn's comments were made in a news conference in Seoul ahead of the Mobile World Congress (MWC) and were embargoed until Monday.

Strategy Analytics forecast the global cellphone market to shrink by 9 percent in 2009, its first decline since 2001. The outlook is especially grim for the first half as shipments slow after year-end holidays in developed markets.

LG will have to focus more on low-end phones, priced at $100 and below, to grow in the shrinking overall market. Ahn said the South Korean company planned to boost sales of low-cost phones by around 20 percent this year.

In 2008, high-end phones, sold at $200 or higher, represented about 80 percent of LG's handset revenue.

However, LG will stay away from the very low-end category of $20 or lower handsets, and instead offer affordable mass-market models that still provide the feel of premium phones, Ahn added.

"We are still in the stage of building up our brand in emerging markets," he said. "And we still want to avoid price competition."

LG is also boosting its smartphone lineup to strengthen its presence in the promising market segment, currently led by Apple's iPhone and the Blackberry from Research In Motion .

LG plans to roll out about 10 new smartphone models this year, up from three unveiled in 2008, Ahn said.

In the long term, LG wants to become No. 2 in the global mobile phone market in three to four years' time, Ahn said, adding: "I doubt whether No. 3 would still be there 3-4 years later."

More From CNBC.com

• China Commentary Blasts "Buy American" Plan
• Job Losses Pose a Threat to Stability Worldwide
• G7 Vows to Fight Downturn, Praises Yuan Moves
• More Asia Pacific News

Ahn said the current downturn and emerging players such as Apple were changing the landscape of the industry, and a few struggling players could disappear.

Slumping demand has begun to hurt mobile makers visibly in the last quarter, with Sony  Ericsson and Motorola posting operating losses on phones and three of the top five players reporting declining shipments. Only Samsung and LG sold more phones and gained market share in October-December.

But their margins suffered as a result. LG's operating margins on mobile phones fell to 5.2 percent in the fourth quarter from 11.5 percent in the third.

Copyright 2009 Reuters. Click for restrictions.