LG warned outsourcing smartphones not enough to compete with Chinese brands

LG Electronics' plan to increase outsourcing of its low to mid-end smartphones to cut costs and compete with Chinese rivals would not work without proper marketing, warns Tom Kang, an analyst at research firm Counterpoint.

Kang noted that without marketing ability, LG will not win against Chinese firms who are good at it.

LG reorganized its mobile phone division to come up with a new unit dubbed original design manufacture (ODM), which refers to the outsourcing of design and manufacture of smartphones, with the brand putting its label on the product.

It has also abolished some research and production positions while reshuffling others as part of an effort to focus its in-house R&D and production on premium smartphones, with low and mid-end ones to be produced by ODM.

LG’s mobile communications business suffered operating losses for 22 consecutive quarters.

Ranking third in the global smartphone market in the first quarter of 2013 by Strategy Analytics, LG did not even make it among the top seven in the third quarter this year. Chinese smartphone makers Huawei, Xiaomi, Oppo, and Vivo topped the list, according to Counterpoint.