– An executive at Samsung, asked recently what he thought of LG, his company's domestic archrival, said with a wry smile that customers for electronic goods will always want to have a second, third or fourth choice, but that his competitor does not have the engineers, the technology, the budget or the leadership to be No. 1 in most types of gadgets.

There was a time when LG was the local champion. In 1959 Lucky Goldstar, as it was then called, produced South Korea's first radio and, soon after, its first electric fan and telephone. By 1970, it was selling the country's first ­refrigerators, ­televisions and air conditioners.

Yet now it beats Samsung in selling only one type of appliance, washing machines, and is struggling to recover the ground it has lost.

Samsung has emerged in recent years as one of the world's dominant makers of microchips and smartphones. Last year, its electronics businesses, including display screens, had nearly four times as much revenue, and nearly 15 times as much operating profit, as LG's equivalent divisions.

LG was once big in semiconductors, but was arm-twisted by the South Korean government into exiting the business as the country's industries were restructuring after the Asian financial crisis of 1997-98. It was once far ahead in selling mobile handsets, too.

Kim Dae-won, author of a study of the two firms' strategies, explains that Samsung sealed its lead when it decided in 2009 to introduce a range of premium-priced smartphones in direct competition with Apple's iPhone. LG's initial reaction was to update its earlier hit, the more basic Chocolate phone. As a result, LG Electronics ­sustained two years of heavy losses in its handsets business. In 2010, its boss resigned, to be replaced by a member of LG's founding Koo family.

Following its belated entry into making smartphones, LG now has less than 5 percent of the world market, whereas Samsung has about a quarter. The field is getting more crowded, with the entry of such Chinese firms as Lenovo, ­Huawei and Xiaomi, and Micromax of India. But LG continues to invest heavily in developing such upmarket models as its G4, launched earlier this year, which has a high-specification camera and an optional stitched-leather back.

Shin Moo-young, a former manager at both firms, is skeptical that such gimmicky features will do the trick, and likens the future of LG's mobile business to the "sad decline into oblivion" of HTC, a once-prominent Taiwanese handset-maker. Though it is early, some analysts recently downgraded their expectations for the G4's sales, whereas Samsung's latest model, the Galaxy S6, seems to be doing fine.

Faced with the difficulty of catching up in smartphones, and increased competition in domestic appliances, LG is betting heavily on some emerging technologies. In particular, since 2013 it has been making televisions with organic light-emitting diode (OLED) displays. These ­displays produce notably crisper pictures than even top-of-the-range liquid-crystal displays (LCDs). However, large OLED panels are costly and fiddly to make. Production yields (the ratio of flawless displays to duds) are depressingly low.

Last year, LG said it had made a breakthrough in a mass-production technique for big displays, and it now says it is achieving yields of up to 80 percent. The first version of its 55-inch curved-screen OLED television in 2013 cost $15,000 but now the latest version of that model can be bought for about $2,500 on Amazon.com, around the price of a similar top-end LCD set. Later this year it will open a second OLED factory, and it is considering a third.

The thin, lightweight OLED displays, which do not need a backlight, are allowing LG to experiment with transparent, rollable, foldable and curved screens. LG is now the world's biggest maker of large displays of all kinds; in a decade its display business has more than tripled its revenue, to 26.4 trillion won ($26.3 billion) last year.

As for smaller displays, it expects that within five years up to 40 percent of the world's smartphones will have flexible OLED screens. LG already has a strong position selling LCD screens to Apple for its mobile devices. DisplaySearch, a market researcher, says LG has the biggest share (over 90 percent) of the global market for smartwatch panels, mostly on the back of sales to Apple.

These days cars are increasingly stuffed with electronics, and LG also is taking advantage of this trend. It is one of the world's four main ­suppliers of display screens to global carmakers. It supplies electric-car batteries to 13 of the world's 20 largest automotive brands. Last December, LG sealed a partnership with Mercedes-Benz to work on camera systems for automated driving. LG is also using OLED technology to create bendable, energy-efficient light panels.

But big OLED-TVs are the area in which it is taking the biggest punt. Samsung is being more cautious than LG in rolling out large-screen OLED TVs. Sony and Panasonic of Japan have abandoned a proposed partnership to mass-produce them. As a result, LG is emerging for the first time in a long while as the leader in a particular component, says Shaun Cochran of CLSA, an investment research firm.

However, in a sense the lack of competition makes things harder for LG. It is having to work alone to create a market for such appliances by getting retailers and consumers to take an ­interest in them. LG is thought to be enduring heavy losses on its OLED TVs, and is a long way from seeing a return on the $3 billion it is said to have invested in production facilities since 2010.

Even if consumers fall in love with ultra-slimline, crystal-clear OLEDs, LG's advantage might not last. Samsung would surely throw its vast resources at trying to catch up.

Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.