LG's (NASDAQOTH:LGEAF) latest flagship smartphone, the G5, went on sale last week. At first glance, it appears to be a traditional, high-end Android flagship. But it's packing a feature its competitors can't offer. Indeed, the G5 may legitimately be the most revolutionary new smartphone in years.
The first modular smartphone from a major handset maker
Specs wise, the G5 is almost indistinguishable from a dozen other expensive Android phones. It has a high-resolution, 5.3-inch screen; a Snapdragon 820 processor; and 4GB of RAM. It has a fingerprint scanner, which has become increasingly ordinary in recent years, a USB Type-C connection, a 2,800 mAh battery, and a body made of metal. It's priced about the same as Samsung's competing Galaxy S7 -- a comparison which isn't favorable for LG. In addition to offering specs as good or better on virtually every front, Samsung's phone is waterproof and supports wireless charging. The G5 offers neither.
Where LG sets the G5 apart is with a unique feature never before seen on a phone from a major handset maker. The G5's lower bezel slides off, and can be replaced with a variety of alternative couplings. LG refers to these as "friends," and they can be used to add additional functionality. So far, LG has announced two: the Cam Plus and the Hi-Fi Plus with B&O Play. The former adds a dedicated shutter button, zoom dial, and hand grip, as well as a large battery -- perfect for long photo sessions. The later offers a headphone amp and support for high-fidelity audio, leveraging the well-respected Bang & Olufsen brand to attract the interest of audiophiles.
The possibilities seem endless. New friends could add support for wireless charging, better speakers, and an even bigger camera. Business users could strap on a hardware keyboard; gamers could attach a dedicated controller. The company could offer a suite of different modules that make the phone far more customizable than any of its competitors -- users could tailor the G5 to their needs and their current location.
Of course, LG has yet to announce any additional modules, or even definitively confirm that they are coming. When it comes to supporting its innovations, the company's recent track record is spotty at best. Last year's LG V10 sported a second display in addition to its main panel. It was an interesting idea, both innovative and unique, but it appears LG has already moved on, as the G5 doesn't offer it.
LG's smartphone business has struggled in recent years. Samsung and Apple have dominated the smartphone market since 2011, but there was a time when LG appeared to be emerging as a legitimate rival. In 2013, the company shipped 47.7 million smartphones, according to IDC, the fourth-most of any firm. But then, in 2014, it slipped to fifth place. Last year, it fell out of the top five altogether.
Samsung and Apple have both experienced shipment growth since then, but the primary culprit for LG's displacement is its rising Chinese competition. Xiaomi, and in particular Huawei, have enjoyed much stronger growth in recent years, relegating LG to a second-rate handset-maker.
LG's brand has remained strong in some markets. In the U.S., where Xiaomi and Huawei are almost nonexistent, LG is still the third-largest seller of smartphones. In January, 9.6% of smartphone owners used LG-made handsets, according to comScore. Apple's share stood at 43.6%, and Samsung's at 28.5%. When LG's 2015 flagship, the G4, went on sale last year, Kantar Worldpanel noted an uptick in demand as LG captured more first-time smartphone buyers and doubled its share of the U.S. smartphone market.
Still, with its global share slipping, LG has to be more aggressive to drive interest in its phones. The G5's system of modular, interchangeable parts appears to hold a great deal of promise. But it may not interest buyers if the company doesn't see it through to its full potential.
Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.