Some lucky people are brilliant at everything. Asian electronics companies have to be at least world-class at something to take on mighty Apple. Samsung Electronicshas scale and is fantastic in smartphones. This week Apple missed forecasts for its fiscal third quarter, but the pending launch of iPhone 5 suggests the lull will not last long. For other Asian electronics companies, though, an absence of scale or a gee-whizz gadget is simply not good enough.
Consider LG Electronics. Yesterday it announced that net income grew by 46 per cent in the second quarter. Notably it was TVs that led most of that growth. Sales growth in the segment was flat but operating profit doubled due to higher-margin products such as 3D TVs. But then LG is the second-biggest maker of TVs by unit sales after Samsung. Everyone else is struggling. The TV division at Sony, the third-biggest maker, has been in the red for eight consecutive years. Sharp’s share price has fallen 80 per cent over the past five years because of its ailing flatscreen business.
Success in TVs for LG is just as well because its smartphones are falling behind. That division swung into losses in the second quarter – marketing expenses as a proportion of revenues have been creeping up by 2 percentage points every three months. For all but Samsung and Apple, the smartphone war is brutal.