iPhone to upset applecart for Samsung, LG in H2

By Jennifer Tan and Rhee So-eui - Analysis

SINGAPORE/SEOUL (Reuters) - South Korean phone makers Samsung and LG enjoyed a stellar start to 2008 but the launch of Apple's much-hyped new iPhone is set to dent their sales and profit margins later this year.

A strong portfolio of phones helped LG Electronics' sales grow at almost four times the annual industry average in the first quarter, while Samsung Electronics expanded at twice the rate, data from Strategy Analytics showed.

But the Korean companies could hit a speed bump in the coming months as the progressive global rollout of Apple Inc's third-generation (3G) iPhone shaves a few percentage points off their profit margins and crimps sales of their top models, analysts said.

"You don't need an analyst to tell you that a low subsidized 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," said Yankee Group analyst John Jackson. "It will hurt the Koreans in key high-end segments."

Rivals Motorola and Sony Ericsson are also expected to face a tough time against the next-generation iPhone which melds a phone, iPod media player and web browser, and offers faster Internet access on advanced wireless networks.

It will sell for as low as $199 when it goes on sale from July 11, half the price of the original model, thanks to heavy operator subsidies.

"Now is the time for Korean makers to trim the fat from cellphone prices -- how can their $700-$800 phones compete with the iPhone?" asked Daiwa Securities analyst Jae Lee.

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