LG to triple China handset output
South Korean phone maker LG Electronics plans to triple its mobile phone production capacity in the mainland in hopes of catching up with its home-town rival, Samsung Electronics.
The company planned to bring the total production capacity at its two mainland sites - Yantai and Qingdao - to 30 million units a year by next year, up from the present 10 million units, said Mun-hwa Park, the president and chief executive of LG's mobile-phone subsidiary, Telecommunication Equipment & Handset.
In an effort to localise its products in China and win over mainland customers, LG is setting up a research and development (R&D) centre in Beijing.
The Korean company plans to build an R&D team of up to 400 in the country by the end of next year.
LG has recently restructured its mobile phone operations by merging the CDMA and GSM divisions and dividing its business and marketing units into six regions, including China, to address localisation needs.
Mr Park declined to say how much LG would invest in its mainland operations.
'We're weaker than our fellow competitor [Samsung],' he said. 'So we're going to expand our R&D and production in China. We're trying to localise our production and R&D. As a part of that, we're investing a lot of money in China and India.'
According to Beijing-based telecommunications research firm Sino Market, Samsung has posted the biggest rise in mainland market share in all categories over the past two quarters.
Samsung and the top two market players, Nokia of Finland and United States-based Motorola, together hold about 45 per cent of the total market.
LG held a 23 per cent share of the CDMA segment as of August, compared with Samsung's 43 per cent, according to research firm Gfk.
When GSM phone sales were included, mainland brands such as Ningbo Bird, TCL and Amoi squeeze LG out of the top 15 companies.
The company attributed its lagging market share, compared with Samsung, to its late entrance to the mainland market and its failure to secure its own handset manufacturing licence there.
LG is licensed to make CDMA phones through Langchao LG Digital Mobile Communication, a joint venture set up in 2001 with Shanghai-listed Shandong Langchao Cheeloosoft.
Because LG cannot sell its own handsets to mainland customers directly, it needs to import its own branded products to the country.
However, without a licence to manufacture GSM phones, the company is limited to assembling operations in the mainland.
LG has filed an application for CDMA and GSM manufacturing licences with mainland regulators.
The Ministry of Information Industry has said it will not issue new licences this year but it is studying plans to open up the handset manufacturing industry with a view to possibly abolishing the licensing system.
