LG Electronics Inc, the world's No. 3 mobile phone maker, aims to increase handset sales by 20 percent this year and is pinning its hopes on Google's Android operating system to beef up its smartphone range.

The South Korean company faces stiff competition in 2010 due to its relatively weak footing in the booming smartphones business against Apple Inc, Research In Motion and Nokia.

LG said on Wednesday it aimed to sell 140 million mobile phones this year. It sold 117 million handsets last year, to claim about 10 percent of the global market.

LG should be able to post some growth in unit sales, but margins could come under pressure if the growth comes from the low-end, said Han Eun-mee, an analyst at HI Investment & Securities in Seoul.

LG has based its mobile phone business on feature-heavy phones covering low- to high-end customers, but has lagged in the smartphone market, where operating systems and software matter.

A device alone won't help us to sustain business, Skott Ahn, LG's president and CEO of mobile communications, told a news conference. We need to build a system where consumers, service operators and software providers can work together effectively.

He added that LG has no plans to develop its own mobile phone operating system.

GOING WITH ANDROID, AND MICROSOFT

LG, which trails Nokia of Finland and South Korean rival Samsung Electronics Co Ltd in mobile phones, will unveil about 20 smartphones this year, with more than half based on Google's Android operating system.

The challenge is that any manufacturer that needs a compelling story right now is pretty reliant on Android, as Symbian and Windows Mobile are in a phase of redevelopment, said Ben Wood, research director at consultancy CCS Insight.

Google's Android has gained traction in the mobile industry, and it is supported by all top handset vendors except Nokia.

Google introduced its first cellphone model last week, the Nexus One -- something analysts said was likely raising worries amongst some handset vendors using Android.

Google's decision to do the Nexus One will certainly have meant that some licensees that were considering abandoning Microsoft may be thinking again so they can keep their options open, Wood said.

LG said its 2010 offerings would also include phones running on Microsoft Corp's Windows Mobile and LiMo's Linux-based software. LG executives declined to say how many Windows phones it was planning to release.

In February last year, LG signed a deal with Microsoft, then saying Windows Mobile would become the primary operating system for its smartphones.

The fact that we'll have a bit more Android phones this year doesn't mean our ties with Microsoft are weakening, Ahn said.

Windows Mobile still has legacy issues that makes it challenging to compete in mobiles: we know it and Microsoft knows it, he said.

Microsoft said the company was very pleased with its relationship with LG and is looking forward to bringing a number of new phones to market in 2010.

By 2012, LG wants to achieve a double-digit share of the global smartphone market.

(Additional reporting by Tarmo Virki in Helsinki)

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