Intense smartphone war eroding vendor margins

With smartphones becoming the battleground for handset vendors, analysts are becoming increasingly concerned at the damage being inflicted on developers' profit margins.

"The smartphone market is becoming heavily congested as a host of players seek to boost margins. The reality in the second half is set to be very different," said analyst Geoff Blaber from the UK consultancy CCS Insight. "The market will swell in volume but price erosion will inevitably result in casualties as value is captured by a minority rather than the majority."

Evidence of the stress being caused came with Samsung warning of weaker margins and profit growth in its telecom unit as it increased marketing spending in the absence of a strong smartphone model.

Nokia has admitted that its cell phone unit margin fell to 9.5 per cent in the second quarter and was likely to slip again this quarter, while LG's handset division reported a loss last quarter and had a negative margin of 3.5 per cent. It has forecast another loss for the business in the current quarter. Article

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