Korean handset makers stage revival

The mobile phone divisions of Korean giants Samsung and LG are reporting healthier results after two years of profit declines in a competitive market, according to analysts. 

Both companies have adopted divergent strategies. LG has gone for the high end with feature-rich phones, while Samsung has concentrated on economies of scale in the mid to low end of the market.

Samsung's handset business reported an operating margin of 13.5 per cent in the first quarter, up from 8.1 per cent in the fourth quarter, and 10 per cent from year ago. Analysts attribute the recent improvement to new cost cutting efforts.

LG is expected to report a 5.8 per cent operating margin, according to Korea Investment and Securities (KIS) in Seoul. 

"Second-quarter earnings at LG's handset business should be driven higher by shipment growth, economies of scale, and high-end products such as the Prada Phone and HSDPA equipped handsets," predicts KIS analyst Greg Roh.

While Samsung should be able to maintain margins at around 12 per cent, it will have trouble increasing them due to rising marketing costs in the competitive mid to low-end, Roh believes.

He also suggests that the company needs to diversify away from its focus on slide-type mobile phones to broaden its market reach further.