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Summary:

Just 40 days after introducing it, LG has sold 1 million Optimus handsets, a relatively low-priced Google Android smartphone targeted for first-time smartphone owners. The Optimus represents a growing challenge for handset companies such as Nokia to transition away from feature phones with value-priced smartphones.

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LG today announced total sales of one million Optimus One smartphones, just 40 days after introducing the inexpensive handset in Asia, Europe and the U.S., reaching the million sales mark five days faster than Samsung’s Galaxy S. The high number of device sales in a relatively short time illustrates the growing challenge to handset companies that still sell the bulk of their devices in the low-end and feature phone segment.

Although the Optimus One is targeted at the first-time smartphone owner, it ships with the latest edition of Google Android, version 2.2 or “Froyo”, and is equipped with typical smartphone features such as a GPS chip, 3G and Wi-Fi radios, a capacitive touchscreen and a 3.2 megapixel camera. Keeping it out of the “high-end” smartphone market are limitations such as a relatively slower processor and lower resolution display, but in my hands-on review, I found the phone to be quite capable. When those limited features are paired with the generous battery, the Optimus One is an all-day smartphone.

Essentially, the device is several steps above a feature phone, but doesn’t require a huge investment for the hardware like an Apple iPhone, Samsung Galaxy or a Nokia N8, which can cost $199 or more with a data contract. The Optimus One I reviewed can be had for $30 at T-Mobile. Indeed, this past weekend, I saw the phone at no cost (with a data plan) in a sales flyer. While the full price of the Optimus One is roughly $230, that’s still far less than the higher end examples whose unsubsidized prices range between $549 and $599.

By selling 1 million Optimus Ones in such a short time, two things come to mind. First, the sales model: LG has taken a similar approach to that of Samsung, who as of last month, has sold 5 million Galaxy S handsets worldwide. Instead of creating a multitude of different smartphones, Samsung designed one truly solid device, which is rebadged and slightly tweaked for carriers around the world. (Related: our review of the Samsung Galaxy S for AT&T ). Doing so helps manage both production costs as well as expenses devoted to research and development.

Secondly, LG is wisely focusing on the first-time smartphone buyer at a time where feature phone sales growth is taking a back seat to smartphones. Compare this to Nokia, which still sells more handsets than any other company in the world, even though Apple and Research In Motion are catching up by selling only smartphones.  Yet, Nokia fans continue to shout a chorus of “Nokia owns the feature phone market and therefore, it will win in the smartphone market too.”

I don’t think such sentiments are a given when a company such as LG can quickly move a million low-end smartphones that run a modern operating system. With the entire smartphone market growing, there’s room for many hardware makers: Nokia, LG, Apple and the like. But the companies that can build a useful smartphone priced at a good value stand to gain many sales among the current billions of feature phone owners: especially in regions like India, where the next 500 million mobile web users are waiting for such affordable devices.

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  1. Just wait until fiscal quarter one of 2011, when the new lower price batches of chips start trickling in from China/Taiwan, and production capacity/velocity increases by 100x

    By this time next year, a nice, 640×480 screen Android phone will be the same price to manufacture as a crappy little mono-screen Nokia is now.

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  2. It is not just Nokia but Microsoft which should be worried about this trend. These users might not consume gigs of data per month but some traffic will come from them.
    Some will soon learn how to get apps and ad supported Android apps work fine. Google sure will make lots of money from this. With the advances coming in the latest releases of Android, seems there is no stopping the droid.

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  3. Oh. Right.

    Nokia sold 12 million smartphones, of which about 9 million would be low cost, in the same time frame based on last quarter’s results.

    Of course that doesn’t include the likes of the S40 driven C3 which sold millions as well (I think a million in one day was quoted).

    Not sure Nokia will lose sleep over this one given LG’s somewhat perilous position in the phone market.

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    1. No argument on the numbers, but isn’t the act of ignoring the competition what put Nokia in its current position? It may not be nearly as perilous as LG’s, but the Nokia folks I’ve spoken to admit to a few years of treading water until the recent “reboot” of the devices group.

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      1. I don’t think Nokia are ignoring the competition. That’s why the shift to Qt and Qt Quick for UI and the demarcation of Symbian^3 and ^4 into Symbian has taken place.

        Nokia’s position has never been as tenuous as LG’s who, frankly, have just become another Android provider in the race to the bottom on margins. Their fall in unit sales – whilst Samsung and Nokia both increased theirs – is testament to that.

        And do you know what? Stripped of the heavy third party UI and on lower spec hardware the Optimus is merely… OK. That’s it. Nothing special and no differentiation aside from the slight tinkering on the UI have done.

        And people wonder why Nokia won’t touch Android with a bargepole.

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      2. “Nothing special and no differentiation aside from the slight tinkering on the UI have done.” just sold a million smartphones in 40 days to non-Nokia customers. Interesting.

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      3. So what? It’s sold a million in a month… just like most of Nokia’s 5xxx series and the likes of the C3. You should also bear in mind these may not be former Nokia buyers who are purchasing these – sales could come at the expense of, say, Samsung.

        LG are now just another Android smartphone maker engaged in a race to the bottom. That’s the bottom line.

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    2. Right… you do know Symbian is a terrible operating system right? I mean Nokia has some neat stuff in the works, but they need to commercialise it first!

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  4. Good job LG! I thought the Optimus S and Optimus T looked appealing for the price. But I had no idea they would sell that good. I kinda wondered why only Sprint and T-mobile got versions of the Optimus One then yesterday I saw the LG Vortex announcement. I wonder why it wasn’t named along the Optimus line. Great job LG for catering to the guy with smaller pockets, unlike the fruity competition who leaches all they can out of their loyal customers pockets.

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  5. Watch out?! Nokia sells 1M smartphones every 4 days.

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    1. Phil, I pointed out that your company still sells the most handsets in the post, so there’s no intent to take away from that accomplishment. But bear in mind that LG’s 1 million phones is 1 million that Nokia *didn’t* sell. Years of not paying attention to the future has opened up the door for other players to grab market share, developer attention and profits — all verifiable through data.

      Nokia has allowed others to grow faster in a market that it essentially owned at the high end. And now the door is opening in the low end – that’s the point here, and the defensive comment tells me that it might have hit home.

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      1. This is good news for LG but for the likes of Nokia they’ve got to just keep doing what they are doing and keep on improving their software. I’ve owned LGs and Samsung phones in the past and had the worst support – no updates not even to fix bugs that really crippled the phones. Nokia has got the manufacturing and supply nailed in most of the world but its software UI looks dated. If it can keep improving the UI then phones like the Nokia C6-01 with there premium metal build quality which will be free on even the cheapest contract in most of the world will sell really well.

        It also desperately needs the N9 to come out. This would provide a halo effect (assuming it turns our to be any good) and hopefully attract developers to QT which would benefit the whole Nokia eco system and get people talking about Nokia.

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  6. Johnny Tremaine Tuesday, November 16, 2010

    Although Nokia should improve faster, they’re not in immediate danger….yet. I figure they have about a year’s time to both improve Symbian and roll-out Meego.

    If Meego fails in the market, like the N900, I’m not sure where else they go though.

    Anyway, the company has superb industrial design, as seen in the build quality of the N8, but in an era of touch screen slab devices, **it’s ALL about the software**.

    And Nokia is simply eye-gougingly awful at software.

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  7. When you say that a company which makes “a useful smartphone priced at a good value stand to gain many sales” I agree. I see Samung and Nokia making both high end and low-end smart phones. However, I consider a device which is “which is rebadged and slightly tweaked for carriers around the world” to be a less of a value for the low end. In many emerging markets people have 2 or 3 sims from different providers and having a carrier-locked phone or customized firmware might won’t be nearly as appreciated in those locales.

    In many places people have to consider the total cost of ownership because often the phone is bought outright and not on a contract. They use prepaid service and are very concious of data prices. The availability of “local apps” also adds value to the smartphone platform. Kudos to LG and anyone else who can deliver high quality at an affordable price

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    1. Stuart, no doubt there are other considerations in emerging markets, i.e.: dual-SIM capabilities and prepaid / no-contract pricing. It’s going to take more time before low-end, but still full-featured smartphone prices drop down into the feature phone price range, but I think that time is sooner than people expect.

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  8. I can see what this can mean. More cheaper smart phones in the hands of first time users or users that don’t want to spend a lot on a high end smartphone, now they can purchase these like the Netbook days. Impulse buying at that low price.

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  9. LG just went on a 1-hour 50% discount sale for the Optimus One here in the Philippines last Saturday(Nov 13). No wonder they’re now boasting of a million sales. Maybe they’ve done the same thing in other countries?

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  10. If LG, Samsung, and others can bring the price point of these Android and Windows Phones down to say 5000 Indian Rupees (about $120) Nokia is dead in the water. Most people pay about that much in India to buy the phone outright (no contracts) and why would anyone buy a feature phone from Nokia when you can get a shiny touchscreen device for the same price???

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    1. Huawei is almost at that price point already: $150 for the Ascend in the U.S. on a no-contract, prepay plan. It’s just a matter of time.

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    2. Yeah… except Nokia have already stated that lower end Symbian devices will transition towards the 120 Euro mark and below and, given Nokia’s scale of production, they’re a lot better equipped to do that than LG are.

      So… uh… no.

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      1. Very easy to agree with Mark (higher up in the thread) and his bottom line. Anybody and their sister can sell volumes but how about profitably and in the long run? Of course, LG and other Android manufacturers now and then make forays into the lower end with some models but can they do this in a sustained fashion? Look at their margins. Android remains a race to the bottom and I have a feeling LG, SE and MOT (and Samsung) will experience this very painfully next year.

        Ignoring competition, as Kevin put it, seriously? No, Nokia have for a long time been beating the crap out of their competition in the low end and this is not about to change (white label manufacturers notwithstanding). I’m aware logistics and distribution do not seem to interest people anymore but, nonetheless, scale advantages are very real and do play very much in Nokia’s favor both in the low and high end, as scale allows NOK to make a buck even with its most outdated s60v5 entry-level smartphones (which it still sells by the boatloads) and as Symbian^3 hardware ramps up and takes significant share from competitors from this Q4 onwards.

        Long term, only profits and scale matter. There is no way around the fact that Symbian allows lower costs/ hardware requirements than Android ever will. Thus Nokia can trickle down higher-end features to their cheap smartphones very profitably. I would wager they will wipe the floor with their Android competitors next year. We have yet to see a profitable Android manufacturer, with the exception of Samsung, who are right now being badly beaten in some markets by Nokia’s S^3 phones.

        By the way, and no offence, I find it truly baffling that the American commentators in general cannot see the obvious – how quickly the competitive landscape is now changing in Nokia’s favor, e.g. with the transformations brought about by Qt and MeeGo. Nokia plays a very long-term game and the ball is now rolling really fast.

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      2. Good thoughts, Maurice. My “ignoring the competition” comment came about because the common response is “but Nokia sold X number of smartphones”, i.e.: focusing on what Nokia is doing rather than the competition. I agree that the company has owned the lower-end market for some time, however.

        I disagree with your statement that we haven’t seen a profitable Android manufacturer aside from Samsung though. HTC is killing it with profits, and Android has financially saved Motorola’s device division. Just two examples.

        In light of that, however, there is a valid point in what you and Mark have said about the profits, long-term. I’d be curious to know how much handset makers are earning directly from Google through search revenues for using Android – if it’s a significant amount (or will be), it could change the business model in terms of profits.

        One last point about the transformations brought about by Qt and MeeGo: Nokia really hasn’t realized them yet and there’s no guarantee it will. MeeGo is still very rough around the edges based on the video out of the recent MeeGo conference. The potential is there, yes, but let’s not suggest the potential is a lock. ;)

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