LG entering mobile CPU market - what are they thinking?

Yesterday, ReCode reported that LG is getting into the mobile CPU game:

“With this in-house solution, we will be able to achieve better vertical integration and further diversify our product strategy against stronger competition,” LG Mobile chief executive Jong-seok Park said in a statement. “Nuclun will give us greater flexibility in our mobile strategy going forward.”

Porter's Five Forces analysis would show the mobile CPU industry is extremely competitive.  Intel can't even buy its way into mobile.  The size of the market is also limited because Apple and Samsung already design their own processors.  Although LG have experience in microelectronics, they don't have much of a semiconductor business.  They will be contracting wafer fabrication to TSMC rather than spending billions on a foundry, but bringing any semiconductor to market is still an expensive, time-consuming, and risky endeavor.

So what the heck is LG thinking?  It has to be all about differentiating their own mobile devices.  LG has been a distant fifth in smartphone market share at around 5% for a few years.  Perhaps this is their way of doubling down on the smartphone market to combat Samsung and lower-priced devices from Chinese rivals.

However, I can't help but wonder if end-users will really notice enough to drive sales.  I'd argue that an easier and perhaps more effective way to differentiate their devices would be to design a custom image sensor for a new camera design, or a new power management subsystem for longer battery life or faster charging.  On the other hand, HTC is continually praised for best in class audio and that hasn't done much for sales of the One.  Maybe LG should just spend the money on marketing?  HTC tried that too with a $1B ad campaign starring Robert Downey Jr.

No Android vendors have been able to meaningfully differentiate on software.  Motorola made a few nice enhancements to the Moto X, but sales still lagged.  Samsung's Note line does have some large-screen-specific software features that help set the device apart.  Most vendor's software tweaks are criticized by reviewers, who seem to prefer stock Android.

LG knows all this.  Maybe in their quest to set themselves apart, they've chosen an expensive and risky strategy to differentiate on the brains of the smartphone.  We'll see in a few weeks when the LG G3 Screen goes on sale in Korea.