Sony and LG still struggled to sell smartphones in Q2 2019, with LG reporting mobile division sales of $1.38B, down 21% YoY
It's that joyous time of the year when we're bombarded with long, boring press releases with lots of numbers on that tell how terrible a company is doing …
Context & Ripple Effects
This report lands in the middle of a decline LG has been documenting for years: the $389M quarterly loss on poor G5 sales in late 2016, the follow-up $224M loss as the G5 kept underperforming into 2017, a temporary loss cut in Q4 2017, and then the Q1 2019 slide to $1.34B in sales, down 30% YoY — its lowest in at least eight years. Q2's $1.38B, down another 21%, confirms that quarter was no anomaly.
For Sony, the same quarter's weak handset performance contrasts sharply with where its money actually comes from: the company's gaming network keeps growing monthly active users, its operating profit is up sharply year over year, and it is investing billions in next-generation image sensors through a planned joint venture with TSMC in Japan. Phones are the laggard line in an otherwise profitable portfolio.
First-order effects
- LG's mobile division shrinks again as a revenue base — after a Q1 already down 30% YoY, the Q2 drop to $1.38B extends a run of year-over-year declines stretching back through 2016, deepening the unit's drag on LG's overall results.
- Sony's handset line remains a rounding error against its gaming and component businesses, reinforcing internal pressure to treat phones as a niche brand play rather than a volume business.
Second-order effects
- Every point of LG share loss flows to the Android leaders at the top of the market, forcing LG to choose between further flagship spending or retrenchment — the same fork it faced when the G5 flopped in 2016.
- As LG and Sony buy fewer components and ship fewer handsets, their supplier chains lose volume, strengthening the case for component-focused strategies like Sony's sensor manufacturing bet with TSMC.
Third-order effects
- If the pattern holds, the Android market consolidates around a handful of high-volume players, with second-tier brands either exiting hardware or surviving as small premium niches — the endpoint LG's eight-year loss streak has been tracing.
- The durable value in the smartphone chain shifts toward upstream components: Sony's multibillion-dollar image-sensor joint venture signals that owning the technology inside phones may matter more than selling the phones themselves.
The trend: Second-tier Android handset makers are in a structural retreat, with former leaders pivoting to components and content businesses while the phone market consolidates.