LG wins GSM Association contract for low-cost 3G handset

It’s official. Twelve global network operators have chosen LG Electronics Co. Ltd.’s KU250 handset as the winner of the GSM Association’s low-cost, 3G handset campaign.
That means LG will ship perhaps millions of units to those operators, which should provide the Korean handset vendor with some volume sales, aiding its quest to shore up market share. Whether LG will profit from those sales remains to be seen.
The GSM Association’s “3G for All” campaign called for the one dozen operators-including Cingular Wireless L.L.C.-to agree on common requirements for a low-cost 3G handset. Eight vendors submitted 19 handset models. The operators then selected LG’s KU250. It was not clear from the various press releases emanating from the 3GSM World Congress in Barcelona exactly which features the KU250 would offer, or its intended retail price, but the wholesale price was said to be about 30 percent less than “typical, entry-level 3G phones.”
LG said it would begin speaking with the dozen operators to determine which operators will order the handset and in what volumes. The GSM Association has said the dozen operators represent about 620 million subscribers.
The KU250 handset is powered by a Qualcomm Inc. chipset, which contributed to the winning handset’s low price.
The contest win brings into question whether low-cost 3G efforts-designed to fuel the growth of entry-level 3G uptake-will influence the handset industry’s declining average selling prices or affect margins at LG. Motorola Inc., which won two GSM Association contracts for low-cost handsets, has shipped significant volumes of its C series handsets in the past year or so, contributing to its growing market share and eroding margins. Motorola, for one, has pointed to 3G handset sales as part of its plan to stave off declining ASPs and revive its margins.