In an exclusive interview with ET, Advait Vaidya, business head – mobile communications at LG Electronics, said the brand has seen 10 times increased sales of smartphones in the past two months due to the anti-China sentiment. It also plans to apply for the production-linked incentive scheme to scale up production. Edited excerpts:
Given the ongoing geo-political tensions between India and China, the consequent consumer anger against Chinese brands is serious these days. Do you feel this is an opportunity for LG to scale up in the smartphone space?
First of all, just to give you an understanding about the current market mood….I will tell you that in the past two months, we have seen 9-10 times increased sell out in our smartphones. Of course, there is a window of opportunity for us. Although, our strategy is not based on the short-term anti-China sentiments, but this definitely is the time level-up. Last year, in July, we launched the W series, made in India, and designed in India, which is seeing amazing sell out till today. There is a clear signal that the consumer wants us, and we are ready with innovation, expertise and strategy to address every kind of consumer demand that is flowing in our direction.
What will be your key comeback strategy to tap on this opportunity?
So, this year, starting August, we will be launching six phones across all segments starting from the sub-RS 10,000 category up to the flagship segment. We are ramping up distribution across channels, online and offline . We are also partnering with enterprise mobility partners to offer our smartphones to the enterprise segment as well as building a strong business with several state governments. In terms of manufacturing, we are ramping-up on a massive scale. If in January the capacity was X units, till August we will be producing 10X units and if all goes well, by Diwali we will be at 12-15X capacity. And we are also foraying in the tablet market by the end of this year as there is a huge adoption in e-learning.
What will be your focus, in terms of price points, affordable, or mid-segment or premium?
According to what we are seeing, the demand definitely is in the affordable category, that is, below Rs 15,000 because of Covid impact on consumers’ spending. So, that is the important area for us. But our flagship portfolio will be intact. Most of the global launches in the premium segment will be brought here as well.
And distribution channels….?
So, because of Covid-19, online sales of mobile phones have increased significantly, People are adopting the easiest way of making smartphone purchases. We made our online debut a few years back, going forward we shall further strengthen our focus in the online space. Meanwhile, there is also increased demand for our products in tier 2 – tier 3 markets and hence we are rapidly expanding offline distribution as well. We are in talks with enterprise mobility partners to get a better reach.
Since you talked about manufacturing, are you planning to apply for the PLI scheme launched by the government recently?
Yes, we are in advanced stages of discussion with one of the largest Indian contract manufacturers in the country. Once we sign a formal agreement we will make an announcement soon and shall apply for the scheme too.
So, how much do you plan to invest and in what areas?
I will not be able to give you a figure unless an official nod is given internally. But as I said we are scaling up our manufacturing capability 12-15 times, the investment is going to be on those lines.
Currently, what is your manufacturing capacity and how much value addition is done in India for smartphones?
We have two manufacturing plants, in Pune and Greater Noida for all product categories. Our high end smartphones are produced out of the Pune factory and balance of the portfolio via our EMS Partner. LG has a global supply chain network and hence we source components globally from different countries.
Are you seeing manufacturing constraints due to stalled imports and labour migration that has happened due to Covid? Factories are running at what capacity as we speak?
There has been a tremendous increase in demand for LG Smartphones and hence , we are running short of supplies. However, going forward our teams are working really hard to ramp up our sourcing as well as manufacturing to meet the huge demand increase.
Does LG also export from India?
Yes, last year, we exported certain units of our W series to the Middle East and Africa.
LG is one among the biggest OEMs globally with a portfolio of multi consumer electronics. But the performance in the smartphone space has declined shapely over the last five years. What do you think is dragging down LG in this space?
India is a unique market with vast consumer needs, earlier we have been launching only global products in the smartphone segment. In 2018, LG Mobile communication unit took up an extensive consumer research study regarding the requirements and buying criteria of the Indian consumers with respect to smartphones, which were found to be unique. Also it is a well-known fact that, in the Indian smartphone market, products can make or break a brand.
Basis the same we were able to convince LG headquarters in Korea to allow us to create an India specific and India first portfolio – the birth of W Series in mid-2019. These Indian consumer-centric products shall further continue in 2020.
Since late 2019, LG has been investing and ramping up the support infrastructure, expanding distribution channels to ensure wider product availability also. So as a Company we are fully ready to enter the smartphone market with the right portfolio, marketing strategy as well as infrastructure needed, to build a long term, sustainable and profitable business.
Starting next month, along with six new smartphone announcements, the industry shall witness a re-emergence of LG in the smartphone space. We will have a robust product portfolio with a mix of global and India specific mobile phones.
Because of the current market scene, a lot of other brands which had almost disappeared over time such as Lava, Karbonn, Micromax are planning a comeback in a big way. Government also has a separate allocation for Indian brands in the PLI scheme. How do you see your positioning vis-a-vis them?
At LG we always welcome healthy competition. Also, LG Electronics is fully committed to Make in India vision……We are in talks with an Indian EMS manufacturer for smartphones. Our focus will be on offering great design & innovative technology to consumers.
Chinese rivals are facing a short term backlash, but it is true, that they dominate 80% of the market today. The rest is with your Korean counterpart Samsung. Do you see this as a sort of challenge for LG’s growth? How difficult will it be for LG to make a mark again?
The challenge as suggested by you is actually a huge opportunity for LG. And as I said earlier, LG as a Company is fully ready to win back its rightful share in the smartphone space. The short-term window of opportunity is big enough for us to enter the space and achieve scale. Once, there is scale, LG has all the key elements needed for success – extremely strong technology and patent portfolio, expertise in manufacturing and very strong local presence in India and high brand salience across categories.
For smartphones, what are your strongest markets globally?
I can answer for Indian market. In India, geographically, we have seen good traction in South India over the years, but, lately, we are making progress in East and North-East India as well.