LG who is set to roll out new mobiles this week in Australia in an effort to take on the new Apple 3G iPhone could face a downturn later this year according to several telecommunication analysts.
According to research data from Strategy Analytics a strong portfolio of phones helped LG Electronics grow at almost four times the annual industry average in the first quarter, while Samsung Electronics expanded at twice the rate the research showed.
The big problem for LG will be the roll out on July 11th of the new Apple 3G iPhone which the experts say will dent their sales and profit margins later this year.
Yankee Group analyst John Jackson told the Guardian newspaper “You don’t need an analyst to tell you that a low subsidised price for the most-anticipated gadget ever is going to move huge amounts of iPhones in the finite number of channels through which they’ll sell. It will hurt the Koreans in key high-end segments.”
One of the new phones set to be rolled out in Australia this week is the new LG Secret which the Korean Company is positioning as a competitor to the iPhone.
Frost & Sullivan analyst Daniel Longfield estimates Samsung and LG’s iPhone lookalikes could suffer up to a 20 percent fall in sales volumes competing head-to-head with Apple’s device.
“If a carrier sells both the iPhone and Samsung or LG’s models, you would expect a solid 10-20 percent decline in those model sales,” Longfield said.
Handset profits for both Samsung and LG probably peaked in the second quarter and are likely to fall in the second half, analysts said.
“Now is the time for Korean makers to trim the fat from cell phone prices — how can their $700-$800 phones compete with the iPhone?” asked Daiwa Securities analyst Jae Lee.
Operating margins at Samsung’s telecoms division rose to a strong 16 percent in the January-March quarter, from 11 percent in the fourth quarter. LG achieved a handset operating margin of 14 percent on a global basis in the first quarter, versus 8.8 percent in the previous quarter.
“Samsung and LG’s margins in the second half will be 1-2 percentage points lower than the first half as they cut prices of their high-end models,” said John Park, a Seoul-based analyst with Daishin Securities.