Apple iPhone hits Asian handset makers' shares

Seoul, Jan 10: Shares in Asian high-end mobile phone makers such as Samsung Electronics and LG Electronics tumbled on Wednesday on worries about their ability to compete with Apple Computer's long-anticipated iPhone.

But handset component makers such as Taiwan's Catcher Technology, as well as some telecom operators such as Japan's Softbank Corp., gained on hopes the iPhone would replicate the runaway success of Apple's iconic iPod.

Regional flash memory chip makers like Japan's Toshiba Corp. and South Korea's Hynix Semiconductor Inc. may also end up benefiting should the iPhone capture the hearts of consumers when it goes on sale in the United States in June.

''For the handset makers, those who are seen to be competing handset makers look vulnerable. Most concerning would be the high-end guys,'' said Malcolm Wood, regional strategist for Morgan Stanley in Hong Kong. ''But those companies in the supply chain for the iPhone will be protected.'' Apple is introducing its mobile phone as global handset makers are already under intense pressure, with Motorola Inc.'s profit warning last week signalling a tough year ahead.

Shares of mobile phone makers in Asia fell, with LG Electronics Inc. dropping 2.7 percent, its biggest one-day fall since Oct. 18, compared with a 1.4 percent decline in the benchmark KOSPI Samsung Electronics Co. Ltd. fell 1.37 percent to 577,000 won, becoming the biggest weight on the index and marking its lowest close since June 23.

Buzz faces Reality

Apple's brand power and its prior success in marrying sleek design with functionality have bolstered optimism about the iPhone's prospects, boosting shares of its potential suppliers.

In Taiwan, Catcher Technology, a maker of casings for laptops and mobile phones, surged 5.22 percent, far outperforming a 1.17 percent fall in the main TAIEX share index Japanese retail investors, who make up the bulk of Softbank's shareholders, sent the mobile operator up 0.4 percent, against a 1.7 percent drop in the Nikkei, as they bet the company would be the most likely to release the iPhone in Japan.

Flash memory chip makers could also benefit, analysts said.

''This is very positive for the chip makers. The iPod has helped drive a good part of the sales of flash memory. If the iPhone also proves successful, it could drive up demand of the chips,'' said Chung Kyun-sik, chief investment officer of Yuris Asset Management in Seoul.

But some analysts also warned against over-reacting.

''Apple may be able to grab around 1 percent of the handset market share with this phone, but they face much more competition compared to the iPod market,'' said Credit Suisse analyst Kevin Chang in Taipei.

Apple Chief Executive Steve Jobs said he expected the company sell 10 million iPhones by end-2008, a tiny fraction of the 1 billion handsets sold globally per year, analysts said.

Chang of Yuris said the iPhone's biggest impact would not be on Samsung or LG, but on companies like Palm Inc. that make high-end smart phones.

S.R. Kwon of Hyundai Securities in Seoul said some had expected Apple would announce a far more aggressive target of as much as 20 million phones, and noted the iPod maker has yet to test its mettle in the crowded mobile phone sector.

''A handset is different from a digital music player. The iPhone needs to match the quality of some of the handsets already in the sector,'' he said.

''They need to transition from the MP3 industry to the handset industry, and we are not sure if they will succeed.''

Reuters