SEOUL: Foreign mobile brands including Apple's iPhone are threatening the market share of South Korean handset makers Samsung and LG.

Apple successfully launched its pioneering smartphone in the Asian nation in November 2009, and racked up sales of 200,000 units during December, the highest single-handset monthly total on record in South Korea.

Samsung and LG, the second and third-largest handset makers in the world respectively, control roughly 80% of the domestic market.

The two firms also make one third of all cellphones sold across the globe, with Samsung alone shipping 227m handsets around the world last year, ten times more than Apple.

However, in common with LG, the firm tends to make and sell lower-specification, cheaper phones than rivals including the iPhone, the BlackBerry range produced by RiM, and Google's Nexus One.

This means that margins are slimmer, hitting corporate earnings.

Collectively, the two firms retain just 4% of the global smartphone market, and only 1.8% of the total software market.

With internet-enabled phone use on the increase globally, the trend away from Korean handsets could accelerate going forward.

Responding to the threat, both companies now plan to expand their smartphone offerings, with LG aiming to introduce several handsets incorporating Google'sAndroid operating system during 2010.

The South Korean government has also responded by launching an $880m programme to assist small software start-ups, which, it is hoped, will grow to become the global brands of the future.

Stated aims of the scheme include tripling the value of the nation's software exports from $5bn to $15bn by 2013.

Lee Sang Jin of the South Korean Ministry of Knowledge Economy, commented: "The government had been preparing to shift our focus to software from hardware for about a year, but the iPhone sensation provided a wake-up call."

Data sourced from Business Week; additional content by Warc staff