LG Electronics, South Korean maker of products from fridges to cell phones, said on Friday it had almost completely stopped selling tube TVs in the European market as it bets the future on thin televisions.
The firm is currently selling its remaining stock. In the future, it will restrict itself to the top end of the market for cathode ray tube (CRT) TVs, such as a new range of ultra-slim CRT TVs built with thinner glass tubes, LG Electronics’ European chief James Kim told Reuters in an interview.
“We will sell those at a 15 to 20 percent premium. But otherwise we have said, ‘As an early innovator, let’s forget CRT. We don’t sell CRTs anymore.’” Kim said.
LG’s main supplier of glass tubes, LG.Philips Displays, could not immediately specify the consequences for its two remaining production sites in France and the Czech Republic, but the 50-50 joint venture LG has with Philips Electronics is preparing another restructuring because of falling demand.
“The market is much weaker than we estimated earlier this year. We cannot avoid more restructuring to bring capacity in line with lower demand,” a spokesman said.
Market researchers estimate that demand for CRT TVs in Europe will drop around 20 percent this year, more than twice the decline that LG Electronics forecast at the beginning of the year, as consumers switch their preferences to liquid crystal display and plasma screen TVs.
“By the fourth quarter, CRT TVs will still be 73 percent of the volume of the TV market but less than half of the value,” said analyst Bob Raikes at Britain-based market researcher Meko.
The biggest reason for the market decline is that retailers are not interested in tube TVs, except for the very basic and cheap models that do not take up much shop floor space.
“There’s no premium market left for CRT. It’s all about cost,” Raikes said.
Become No. 2 or 3
LG’s move to abandon the CRT market is part of its strategy to focus on premium, higher-priced products in mobile phones, TVs, fridges and washing machines in an attempt to boost its ranking from fourth or fifth biggest in the European market to second or third.
If premium products generate around 30 percent of sales in the consumer electronics market, Kim said, LG’s aim is to be above that mark with closet-sized fridges with integrated TVs, steam washing machines and 3G cell phones shaped like racing cars that can analyze your breath after a few alcoholic drinks.
In 2004, Kim’s first year in Europe, sales more than doubled to 3,847 billion won from 1,788 billion in 2003, helped by an aggressive push into the European mobile handset market. First-half 2005 European sales of the world’s No. 4 mobile phone maker were up 17 percent at 1,950 billion won.
This fourth quarter it will, for the first time, launch cell phones that will be sold through independent retail outlets, rather than through telecoms carriers deals.
Only by testing consumer preferences in this retail market can LG continue to gain market share, said Kim, who ran the firm’s global cell phone business before he came to Europe.
LG’s market share gains slowed in recent quarters after years of 60 percent annual growth. It needs to grab at least 10 percent of the global cell phone market, versus its current 7.4 percent, if it wants to survive and deliver healthy profits, Kim added.
Unlike Europe’s top consumer electronics maker Philips, LG is still investing in its own production facilities. LG is in talks to open a second plant in Poland that will employ up to 3,000 staff and may involve $100 million of investments.
If discussions with Polish authorities are concluded successfully, the plant where LG plans to assemble 3.5 million flat-screen televisions and 500,000 refrigerators every year will be based near the university town of Wroclaw.
LG Electronics earlier this month started production at a new TV and monitors plant in the Polish town of Mlawa, but LG expects demand to rise so fast that it will need to expand capacity.
