LG to focus on IT, GSM sectors

LG Electronics India (LGEIL) will shift its marketing focus to IT and communication products to drive its growth next year. The company's current focus is on the consumer electronics and home appliances (CE&HA) segment. A deceleration of growth in the consumer electronics market this year has been cited as the reason for the shift.

"We do not think the CE&HA sector can help us achieve our target," said Gaurav Bapat, head - marketing, LGEIL.

The company, which currently generates nearly 80 per cent of its revenues from the traditional CE&HA sector, had to cut its growth forecast by half this year after sales of colour TVs and refrigerators slumped during the first half.

Blaming natural disasters and other reasons, the company had cut its initial revenue growth target of 32 per cent to 23 per cent this year. Last year, the company had clocked Rs 6,500 crore revenue.

The company currently has only around three to five per cent market share in the competitive PC and mobile phone markets, excluding the CDMA segment, though it entered both the markets more than a year ago.

LG has, in the past few weeks, launched new higher end GSM phones with features like external memory cards, bluetooth etc. "We will increase the number to models to around 25 by the end of the next year," Bapat said. The company has 10 models at present.

"Our target is to grow the markt share to at least 20 per cent by the end of 2007 from the current five per cent," he said. The company also expects GSM's share in its total turnover to go up from under 5 per cent now to at least 10 per cent next year.

"We expect the turnover to cross the Rs 10,000 crore mark and aim at generating roughly 20 per cent of that from the desktop and laptop business as well," he added.

Bapat also said the company expects its CE&HA segment to grow at around "15 to 20 per cent" next year, trailing behind the overall projected growth rate of 25 to 30 per cent. The difference is to be made up through higher growth rates in the other two segments, he pointed out.

The consumer durables market has been a scene of turmoil this year, with the traditional mainstay of colour television and refrigerator markets failing to grow and even shrinking. The reason being cited is that consumers spent more on emerging segments such as mobile phones and PCs.

While last year TV and refrigerator sales accounted for Rs 9,000 crore and Rs 4,000 crore to the durables industry turnover, this year mobile phones and PCs are vying for the second place.

"We expect the mobile phone business to be worth around Rs 8,000 crore to Rs 9,000 crore and the PC and peripherals business to be around Rs 6,000-7,000 crore this year," Bapat said.

LG, though has meagre share in the branded desktop and laptop markets, has a strong 22 per cent plus share in the monitor business and therefore extends its arms into the "white-box" segment as well.

As for the consumer electronics division, LG expects the colour television industry as such to cover some of its lost ground in the present quarter and end up growing around 8 to 10 per cent, Bapat said.

Smaller segments within the electronics business and appliances, such as DVD players and microwave ovens, have been showing high growth rates and have compensated to some extent for the slump in TV sales, he added.