In further attempt to heighten vertical integration, Korean makers such as Samsung Electronics, LG Electronics, and Pantech affiliates are stepping up adoption of key components produced in-house or by allies. Share of local procurement of camera phone components, particularly in 2MP (Mega Pixel) phones, will also be increased from 60% to over 70% of total procurement value.

Samsung Electronics is expected to procure a larger volume of camera modules in Korea, now that Samsung Electro-Mechanics and Samsung Techwin have jointly developed 2MP and 3MP camera modules. As a result, with the exception of modem chips, Samsung Electronics is now procuring domestically all major handset components such as LCD (Liquid Crystal Display) panel, flash memory, battery, and camera modules.

LG Electronics began to procure from LG Innotek camera modules of 1.3MP and lower in the first half of 2004, and is now planning to do the same for 2MP and 3MP modules, which are currently imported. Additionally, LG Electronics recently started to adopt secondary batteries from LG Chem instead of Sony, and decided to produce flash memory in-house.

By the end of 2004, LG Electronics is expected to boost share of local procurement to 70%. Also, the company expressed that it would first seek cooperation from its Korean allies for supply of new handset components.

Pantech, along with Pantech & Curitel, recently drove up share of local procurement to 70% of total procurement value, up from 40% seen in the beginning of 2004. The Korean vendor has successfully developed camera modules capable of 1.3MP and 3MP. Coupled with further consolidation of technologies such as ASIC (Application Specific Integrated Circuit) and video compression, Pantech claims to be saving US$70 million a year that would have been spent on imported components.