iPhone Casts Clouds for Korean Handset Makers

Things are looking gloomy for Korea's mobile phone exports. According to statistics released on Friday by the Ministry of Knowledge Economy, mobile phone exports in the first quarter were an estimated US$6.549 billion, down 11.4 percent compared to a year ago. Last year was a bad one for the industry due to the global economic crisis, with full-year exports dropping 13.2 percent from 2008. So with signs of recovery in the global economy this year, it is worrying that exports are continuing to fall.

Experts blame the drop on the fact that Korea's main export handsets -- high-end advanced mobile phones -- are struggling to compete with the Apple iPhone. In fact, Korean manufacturers like Samsung Electronics and LG Electronics have not been able to launch hit high-end models since the second half of last year.

A key industry insider said, "Overseas mobile operators, who exert huge influence on mobile phone sales, prefer smartphones that incur higher charges for customers and provide heavier subsidies for such models. This is playing against Korean mobile phones in the global market."

The future also promises no respite. Apple recently announced that it will start producing a CDMA version of the iPhone to be released in North America. It aims to expand its market share there by ending its exclusive partnership with AT&T and also working with Verizon Wireless, the largest mobile operator in the U.S., and Sprint Nextel, third in the market, both of which use CDMA technology. This will be a great challenge for Korean mobile phone makers who have been dominating the CDMA segment of the North American market.