Booming demand for new, cheaper smartphones helped fuel a recovery in the overall handset market late last year, but rivalry for a piece of this lucrative business will turn fierce in 2010 as many new vendors enter the market.

South Korean firms Samsung Electronics and LG Electronics, the world’s No. 2 and No. 3 handset vendors, are planning to sharply increase their very low smartphone sales, while new players like Huawei and Dell are strengthening their offerings.

HTC, the world’s No. 4 smartphone brand, said last week it will be one of the first to suffer from increasing competition when it forecast a decline in gross profit margin in the first quarter of 2010.

Strategy Analytics said on Monday the smartphone market grew 30% year-on-year in the December quarter to 53 million phones, the highest ever.

The growth was part of the overall market recovery in October-December thanks to an improving global economic picture.

SA estimated the cellphone market grew 10% from a year before, halting four straight quarters of contraction.

Finland’s Nokia, which continues to sell more smartphones than its two closest rivals — RIM and Apple — combined, shipped 20,8 million smartphones in the December quarter, up 38% from a year ago.

An improving position in…