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Electronics Manufacturing – M528

The LG Wears Prada

 

There Is Strength In Numbers

There are many reasons why a company would want to form an alliance with another. There are all sorts of reasons, ranging from publicity stunts to an attempt to boost profits to forming cartels. What causes a company to want to pair up with another company? Especially one that would also play as its its competitor. Although there are risks involved in partnerships such as a difference in marketing strategies and aims and beliefs that each partner stands behind and has built its every foundation on. In most cases the risks far outweigh the potential benefits that would be realised with the partnership. When we talk about LG, a company that has been around a long time and is no stranger to many a household these days and with the vast number of products that feature the LG label, one can only imagine the collaboration with other companies that has been involved in the finished products that LG market today. This article will not be looking at the possible hundreds of partnerships but only look into three of LG's partners and what they bring to LG as well as what LG does for its partners. Under the microscope will be Prada, Philips and Synaptics.



All Partners

LG And Trio

LG and the trio - Is this a match made in heaven or just a well planned partnership? Forming meaningful partnerships can be a foundation for success considering that partnerships can enable companies to make continuous improvements. In saying that partners have to agree to work together to achieve a common purpose or undertake a specific task and share the risks, responsibilities, resources and benefits. Linking up with other companies also allows a company and in this case LG to gain a competitive advantage through accessing its partners resources, including already established markets, technologies, capital and people from its partners. Forming these alliances gives LG complimentary resources and capabilities for LG and its partners to grow and expand more quickly and extend their technical and operational resources which boosts productivity without having to develop their own specific technologies for certain projects from scratch. Not all partnerships with LG are with very well-known companies but nevertheless well established companies. Depending on the projects its embarking on, most partnerships are signed up and work starts off long before they are even announced, for example the latest project with Prada had been in the pipeline for two years but only announced a year after it all started. Another unlikely collaboration is with Philips, a company its also competing with on many product lines but still signed a joint venture to create LG Philips plasma screens and other modules.

LG, a South Korean conglomerate known for producing electronics, mobile phones, and petrochemical products and in the business since 1947 has made a name for itself in the market and now proving to be capable of offering style and quality products hand in hand. Collaboration in this business in the way forward as so many companies have found out. In order to stay in the business or stay in the competition the selection of partners with whom to collaborate with is becoming a life and death issue for most firms although not entirely for those well established but they still face noticeable losses. Below is a dissection of the partnerships mentioned above.

 

Is There A Place For Fashion In Electronics?

Fashion joins the electronics world - Prada and LG with Synaptics in the background. LG Electronics, a worldwide technology leader in mobile communications, and Prada, one of the world’s leading brands in the luxury goods industry. If you thought this was the first of this kind of partnerships then you will find yourself to be mistaken. Many have tried but have not seen the success currently being enjoyed by the LG Prada unity. Escada teamed up with Siemens and Dolce and Gabbana teamed up with Motorola on one of the Razor mobile phone models. Compared to the phones that were released by these companies the LG Prada collaboration brings to the table something that has not been seen yet. Setting precedent with the release of the first mobile phone to function almost entirely using a touch screen - a buttonless interface. With the announcement before launch promising a "wow factor" with a high-end technology with avant-garde design offering the best in both style and performance. The end product speaks for itself, but there is a somewhat silent partner in all this that should be taking most of the credit as its providing the very technology that is making the LG Prada phone the must-have of today's gadgets. The silent partner in this is off course Synaptics. Synaptics created the well hyped up touch screen but it appears that they have provided this same technology to Apple's iPhone although Apple refuse to comment saying they do not comment on rumor and speculation( Roberts, 2007, Para 10). This will hopefully not end up in court but even so it might just bring more needed publicity to both products.



LG Prada Phone

 

Prada are known for their attention to detail and uncompromising quality on their products. LG are following on the success of the LG Chocolate and that being LG's best selling model they have ever produced todate (Ihlwan, 2007, Pg 2, Para 2), this new partnership brings a bit more to this new model. Prada not only designed accessories, presentation and packaging of the phone they also bring a certain class and sophistication as well as an established loyal fun base to this collaboration. Prada, a well known fashion house that has been around nearly a century, founded in 1913 and has a reputation for style and luxury and one expects the very best from the label so most know to expect a certain price tag for the goods. According to Portable Media Player Daily News, the LG Prada phone is selling thousands upon thousand (PMP Today, 2007, Para 1) but figures will not be released for a while being that the phone was only released to the market. This partnership was also as a result of LG realising that design has become a good enough factor for people to choose their phones.

Synaptics brings to this partnership and the LG Prada phone a technology that uses a capacitance sensor on the screen – like the touchpad on a notebook computer – which creates an electric field which the touch of a finger interrupts. So you cannot use a stylus to operate it - the little pen like device used to tap at the mobile phone screens. The benefit to LG with this partnership is that it alleviates the need for LG to develop research into such a technology but instead can out source this side of the project to a well known company in the field of electronics and one that it has worked with on many other projects. Synaptics also works with other big companies in providing mobile communication technologies such as that seen in the iPhone and the LG Prada smart phone. Synaptics although not so common to many consumers but plays a big part in our lives without us knowing it. They are a leading developer of custom-designed user interface solutions for mobile computing, communications and entertainment devices. They provide touch-pads for most of the major computer and laptop companies like Asus, Acer, Dell, HP, Sony, Toshiba, Gateway, IBM, Lenovo, Samsung and several others. Touchpads operate by sensing the capacitance of a finger, or the capacitance between sensors. Capacitive sensors are laid out along the horizontal and vertical axes of the touchpad. The technology used in these touchpads has now been adapted for mobile phones and is what has brought the LG Prada to life. Although only in the business since 1986, the year 2005 saw profits in excess of $208 million (Wikipedia, 2005 d) for a company with around 200 employees at the time. The fact that Synaptics is not dependent on one company for there revenue and there constant investment in research and development enables them to have an amazing portfolio of customers. This also helps in keeping them in business as opposed to sticking with one client who if they decided to change direction and change suppliers would leave them at a disadvantage. It also means that the partnership is not controlled by one side which forms a balance as competitors as well as LG's and Synaptic's other partners would still be interested in why the partnership broke down whatever the reason.

The Synaptics and LG partnership has been established for many years as they have collaborated on many previous projects so for the foreseeable future although only time will tell if there will be an LG Prada II and if Synaptics plays a part in that or if they work together on a totally new project with as much "wow factor" as this project. It is too early to tell and much to early for the company to announce as the total units sold for the LG Prada phone have not been released with revenues proving the success of this union. It will certainly do a lot for the Prada brand name as this is another item to add to their portfolio of products they are getting involved in. As they already sell mobile phone accessories this will be used to promote their accessories and gain more revenue sales linked to the LG Prada phone. This product has also spawned Prada labeled additional devices like wireless mobile headsets. The success of this will also cement the relationship with Synaptics as a realiable partner that has delivered and test after test they have received positive feedback about their technology on the phone which will improved the partnership and drive Synaptics into putting more research into such technologies which will generated a lot of revenue as this technology will be offered in variations to other partners of Synaptics.

 


LG & Philips

The LG And Philips - Equal Partners?

This partnership was a 50-50 joint venture established in 1999 to co-produce LCD flat screens. This partnership came about when they saw a potential demand in the market at the time in TFT screens as LG was leading in Korea at the time of the partnership with the same line of products as Samsung who were leader at that time. Philips and LG got together to contribute equally in this venture as they were both looking into producing products that would knock Samsung off the number one spot in the market of LCD flat screens. Philips employing people in more that 60 countries and with electronics experience dating back to1891 has seen its fair share of action and still manages to show staying power in the electronics market. With divisions handling specific groups of electronics businesses. The joint venture with LG saw an alliance that brought two companies with the same goal in mind to put together the technologies they develop into something of a super brand of LCD screens. LG Philips is now a leading manufacturer and supplier of thin-film transistor liquid crystal display (TFT-LCD) panels. The company manufactures TFT-LCD panels in a wide range of sizes and specifications for use in TVs, monitors, notebook PCs, and various applications. In order to save costs and have neutral ground both parties invested in factory plants built to house both heads under one roof with some factories built in England and Wales to enable both LG and Philips to co-produce in one place. The partnership has cost jobs in recent years due to closures of some factories due to restructuring as a results of an over sighting in future predictions and the demand of flat screens at the time which also saw the partnership raise $1billion through offering Initial Public Offerings of its shares on the stock market to further invest in developments and production of flat screens (BBC, 2004).

Philips brings over a century's worth of technical experience to this partnership and the pipelined developments that LG can contribute which have resulted in a successful though at times turbulent relationship but saw success when its efforts resulted in an equal LCD screen market share of 22% with Samsung as of last year (Wikipedia, n.d). LG also brings the Philips brand fresh new ideas as well as a new image to their traditional style of opertations shown through their product lines. LG and Philips were leaders in LCD TV manufacturing but in different geographical areas and through their relationship they have put heads together in further developing their technologies to be the best and produce active matrix LCDs. The joint venture not only produces products to sell on to consumers but also produces modules that are then sold to TV or PC manufacturers for use in the production of LCD TVs, monitors, and notebook PCs before being delivered to end users. Always pushing boundaries due to constant competition with not only leaders of the market but those trying to break into the market. Both partners share the risks equally and with recent success has seen the partnership turn into an independent company in 2004 due to the success of joint venture shown on the stock market..

With both partners experienced, the benefits are that both have a clear goal to be top at the top in LCD screen producers which means both partners will want a successful result. With Philips being a far bigger company they also bring to this partnership the man power of its 125, 500 employees. As shown below in the chart apart from 2001 and last year they have had a steady increase in profit with increased sales the decline of last year was due to pressures in pricing of TFT screens and an over number of units produced which was faced by Samsung among other companies in the field (LG Philips Press Release,2007, Para 1). With this being a joint venture both parties are continually trying to cut costs as with the losses from 2006 they announced beginning of this year that they will be maintaining the aim in cost reduction efforts and improving on their expense structure in product planning and development while also reducing component cost. This might also involve sourcing out other partners who will supplier some the components used in there LCD screens and in turn certain terms will have to be set in place to ensure that those partnerships works in line with their goals in wanting to lead in the manufacturing of TFT screens and like products. The company has also invested just under $2 billion to build a new sixth-generation TFT-LCD plant in Gumi, south of Seoul. In addition to its Korean facilities, where the core panels are made, LG Philips. LG Philips unity has a lot of experience in this market together with the united goal to undertake prudent investment in the productivity of existing facilities and efficient balancing production lines will continue to make this partnership a success. This relationship is balanced but as the partners now have other share holders and with LG now owning more shares in the venture than Philips (Wikipedia, n.d c) it would only break up if one partner is investing or losing out more than the other. Also as the prices and demand for LCD screens have fluctuated, the future will tell if this partnership will develop more into the technology of these products to increase sales or split the venture.

 


LG Philips Revenue

Future Partnerships - Building On Previous Success

LG has had a steady incline in its popularity and profit increases and on the phone business side its recent success has seen a boost in the average selling price of their phones in Europe(Ihlwan, 2007, Pg 2, Para 2). This has allowed it to invest in a lot of projects and in doing so have carefully selected partners to work with that would compliment its goals and ensuring that the selected partners are reliable and able to provide the support required for specific projects as well as deliver on time. The partnering processing has aided in the success of these partnerships in that most of the partnerships taken on have been jointly set up so that resources from both sides of the partnership are utilized effectively in order to achieve the desired goal as well as establishing a partnership that invests in the partnership equally to share risks excepts in partnerships where LG has just required supply of a service of some kind which results in LG depending on that company to deliver without any technological input required from LG i.e. the outsourcing of Synaptics to provide a particular technology to the design of the LG Prada phone. The success and reputation gained from these partnerships are the reason why LG is constantly improving its popularity from the recent loss making bussines it was and is now striving to top each successful story it has had in the past.

The above partnerships mentioned show that LG is not only making head way and taking risks with various partners but the success speaks for its self such as at that from the LG Prada collaboration and now attempting to build the largest LCD screen seen yet with Philips. With samsung always trying go one better with each release of LG Philips LCDs shows that competition is paying attention and that LG is certainly making an impression. In future I believe they will be striving to make sure each potential partner is scrutinised as they now have a reputation to keep up with this new popularity in an aim to come up with something different and up market. LG is not the only company that benefits in the above partnerships, the other companies also get their fair share such as Synaptics who have yet another marketed product featuring their technology and have had a lot of publicity linked with the above project which not only brings them a lot of money but will also bring them more clients in future due to the impression they are making at the moment.

References

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 http://news.bbc.co.uk/1/hi/business/3899069.stm

Cellen-Jones R. (2007). Everything But The iPhone. Retrieved May 7, 2007 from
http://news.bbc.co.uk/1/hi/technology/6353227.stm

Fashion United. (2007). Prada Phone? Retrieved May 11, 2007 from
 http://www.fashionunited.co.uk/news/prada.htm

Hill & Knowlton . (2006). LG And Prada Partner To Develop Iconic Mobile Phone. Retrieved May 10, 2007 from
 http://www.sourcewire.com/releases/rel_display.php?relid=28682&hilit

Ihlwan, M. (2007). The Devil Dials Prada On LG's New Phone. Retrieved May 11, 2007 from
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LG. (2006). - LG And Prada Partner To Develop Iconic Mobile Phone. Retrieved May 10, 2007 from
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LG Philips. (2006). LG.Philips LCD’s Module Plant in Poland Begins Mass Production . Retrieved May 10, 2007 from
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LG Philips. (2007). LG.Philips LCD Unveils 15.1-Inch XGA TFT-LCD for Television Applications. Retrieved May 10, 2007 from
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LG Philips.(2002). LG.Philips LCD Strengthens Manufacturing Muscle With an Additional Fifth-generation TFT-LCD Factory. Retrieved May 10, 2007 from
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