Samsung bets big on foldable smartphones amid chip crunch

[khtannnnnnnnnn]

Samsung Electronics is betting heavily on foldable smartphones, with plans to sharply increase production and a new, double-folding model under development, Nikkei Asia has learned.

Samsung has previously announced it will skip introducing a new version of one of its nonfolding flagship phones, the Note, this year, while CEO Koh Dong-jin said the company hopes to increase its foldable phone production despite an ongoing global chip shortage.

The South Korean tech giant plans to release the new generations of its Galaxy Z Flip and Galaxy Z Fold phones this year, sources said, and is also working on a double-folding phone that could be unveiled as early as the end of this year, according to three sources. Samsung has filed multiple patents for a double-hinged design.

Samsung has also set an ambitious internal goal to boost its total foldable smartphone shipments to a similar level as those of the popular Galaxy Note series, exceeding 10 million units annually, one person with direct knowledge told Nikkei. However, that goal will be tested by market conditions and the state of the chip and component crunch, the person added.

Industry sources and analysts say the focus on foldable phones is aimed at differentiating its offerings as well as taking advantage of the fatter margins on such devices.

"The suspension of the Note series was pretty much decided last year. The company wants to bet more on foldable phones that have much higher prices with distinctive designs," one of the people familiar with the matter said. 

Another person familiar with Samsung's plan said the company has "long struggled to differentiate its two premium phone series, the Galaxy S and Note, which are often set for the first half of the year and the second half, respectively. ... The company is thinking to use foldable phones as a key differentiator and hopefully to replace its Note series in some ways."

Samsung declined Nikkei Asia's request to comment for this story.

If the goal for foldable shipments is reached, the higher retail price of such phones means Samsung would likely enjoy an improved revenue performance. The Galaxy Z Fold 2 5G that launched last year carried a retail price of $1,999, whereas the Galaxy Note 20's starting price is $999.

The unprecedented global shortages of chips and components, however, could disrupt the South Korean company's ambitious plans, multiple sources said.

CEO Koh Dong-jin, in charge of Samsung's mobile division, addressed the issue at the company's annual general meeting on Wednesday.

"We are making our best efforts to increase production of foldable smartphones. ... For the foldable phones, the display matters the most. We resolved considerable parts of problems [in securing display supplies], although we still cannot produce as many foldable phones as other smartphones."

Samsung has acknowledged that the global chip supply crunch may be problematic for the company for the April-June period but said it is making additional efforts to tackle the issue. The company did not cite the chip shortage as a reason for its decision not to introduce this year a new Galaxy Note phone, which usually competes with the new iPhone series in the second half of the year. Chip supply issues have already hit automakers, industrial computers and consumer electronics.

Details of the double-folding phone, meanwhile, are still being finalized, three sources familiar with the matter said, but it is expected to be a more app-friendly design.

"The design is set to make the unfolded screen aspect ratio be in line with the mainstream ratio of 16:9 or 18:9, so more video games and other apps could run more smoothly with better resolutions on the device," one of the people said.

The Galaxy Z Flip and Galaxy Z Fold each have one hinge. Unfolded, the Fold 2 has a screen ratio of 25:9, which means app developers have to design their products specifically to fit the unique aspect ratio.

The South Korean company still ranked as the world's biggest smartphone maker in 2020, with 266.7 million handsets sold, but its shipments fell nearly 10%, while its major rival, Apple, saw an increase of 7.9%, data from research company IDC showed.

Jeff Pu, an analyst with GF Securities, told Nikkei Asia that Samsung has long planned to replace the Note series with foldable devices.

"It's a smart move. ... Smartphones look too similar already. Betting on foldable phones also means higher selling prices," Pu said. "Samsung still has the edge over all of its competitors, as it produces these screens itself and has invested to research and develop such tech for a long time."

According to Pu's estimate and supply chain checks, Samsung shipped some 3.5 million foldable smartphones last year, and it is "very likely" that it could double that total to 7.5 million units this year. 

[MangoTango]

👍🏼