LG Electronics bets big on Velvet

Rendered image of the new LG Velvet smartphone by LG Electronics. [LG ELECTRONICS]

LG Electronics is rebuilding its sluggish smartphone business from scratch, announcing Sunday that it will ditch both of its existing product lines and go all in on the “Velvet,” its latest attempt to compete in the market.

The LG Velvet will launch next month in Korea, the company announced, while offering a glimpse at the forthcoming gadget.

The new branding is intended to show the company is “moving away from alphanumerical designations in favor of familiar and expressive names that will help the consumer capture the essence of the device,” LG said in a statement.

The company’s two high-end smartphone brands, the G and V series, will be discontinued, the company said.

The G series was one of LG’s earliest smartphone brands, launched in 2012 under the guidance of former LG Group Chairman Koo Bon-moo. The V series started in 2015, with a slightly larger screen and an emphasis on multimedia.

Both lines were named by combining alphabets and numbers, as did the latest G8 ThinQ and V60 ThinQ. From now on, LG avoids alphanumerics and attaches a nominal name exclusive to each product, which the company said it hopes will help establish a clear brand identity.

But why “velvet?”

“Lustrous smoothness and premium softness,” the company said.

LG shared an image of the new phone last week. It includes a design in which the right and left edges of the display are curved to allow for a softer grip than sharp edges.

The rear cameras are aligned in a single line, with the largest camera at the top left corner followed by two cameras and an LED flash that gradually gets smaller in size, top down - a design feature LG calls the “Raindrop” camera.

The Velvet will be a 5G-compatible phone in the “mass premium” segment, meaning its price tag will be set between the top-tier “premium” and mid-priced phones.

It remains to be seen if the new direction will produce a turnaround in LG’s mobile business. In the 2000s, the company was known for producing some of the best-selling cellphones but failed to keep pace when smartphones quickly rose to prominence in the early 2010s.

Since then, smartphones have always been the electronics company’s weakness. LG’s poor smartphone sales have been well-documented, and the conglomerate’s overall decline in recent years has in part been blamed on its ailing mobile business.

The latest strategy shift is reminiscent of LG’s biggest mobile successes. Released in 2006, the Chocolate phone and Prada phone were the cornerstones of LG’s golden age, garnering commercial success and global attention.

Back then, both models were acclaimed for their design and intuitive product names that, in the case of the Prada phone, reflected its Italian designer.

As of the fourth quarter of 2019, LG’s mobile business had recorded 19 consecutive quarters of operating losses.

The Velvet’s launch comes in a difficult time for smartphone makers, with a pandemic slowing global demand.

But some analysts have given a positive reception to LG’s structural changes to its mobile business, which included cost-cutting efforts like increasing the proportion of original design manufacturers and relocating plants to Vietnam.

The “worst has passed for [LG’s] smartphone business,” KB Securities analyst Jeff Kim summarized in a report last week.

He also noted that the company’s mobile communications division “is expected to improve its cost structure in the second quarter of 2020 and reduce losses in the second half of the year.”

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]