Excessive-end smartphones sign the corporate’s innovation

High-end smartphones signal the company's innovation

SINGAPORE – Samsung will launch its latest Galaxy smartphones on Thursday. These expensive devices are expected to generate revenue and margins, an analyst told CNBC.

The South Korean tech giant’s high-end flagship devices are “trophy” products that signal to the entire industry what innovations the company has in store for the rest of its product line, Bryan Ma, vice president of device research at International Data Corporation said.

According to reports, Samsung may announce three smartphones for the Galaxy S series: S21, S21 +, and S21 Ultra to replace the company’s S20 devices. The launch will air on the Samsung website at 10 a.m. ET (11 p.m. HK / SIN).

“I think there is obviously some pressure in the midst of the pandemic, both on the units and on the average selling prices, but even so, of course, this is still a flagship that has its place in the industry,” Ma said Thursday on CNBC’s “Squawk Box Asia”.

Typically, Samsung launches its flagship Galaxy devices in February or March near or during the Mobile World Congress.

Ma said one of the reasons Samsung moved forward to January is to capitalize on Huawei’s ongoing struggles by “releasing a product like this and taking advantage of that opportunity as much as possible.”

Seize the market opportunity

As part of a wider trade war between Washington and Beijing, US sanctions have affected Huawei’s ability to do business. At one point last year, the Chinese company had dethroned Samsung as the world’s leading smartphone maker, but that triumph was short-lived and its share of the smartphone market was shrinking.

While Samsung gained some of the market share last year, Chinese smartphone maker Xiaomi has stepped up efforts in countries like Western Europe to fill the void left by Huawei through aggressive promotions and visibility efforts.

One of the big things Samsung is betting on is leaflets, which the rest of the industry doesn’t quite have yet. And Samsung is already in the second and is now getting into third generation products

This is also likely another reason why Samsung has likely brought forward its launch event, according to Ma. “As much as Xiaomi is known for its lower-priced products, they also say, ‘Take a look at this flagship Mi-11 phone with this great camera’ and all of those things. This is where Samsung basically comes in at that Stage and say, “Look, we have that here too,” he said.

The maturity of the smartphone industry limits the type of innovation that companies like Samsung can promote in their new generation of devices. However, the world’s largest smartphone maker is making headway in an area where the rest of the industry is still catching up.

Betting on foldable smartphones

“Remember, one of the big things Samsung is betting on is leaflets that most others in the industry don’t quite have. And Samsung is already in second place and is now moving to third generation products,” he said Ma said. He expects a new foldable device to be announced in the second half of 2021.

Samsung’s president and head of wireless communications, TM Roh, said in a blog post last year that the company will expand its portfolio of foldable smartphones and make these devices “more accessible” to everyone. This could potentially point to foldable smartphones at a less expensive price than what Samsung currently has on the market.

Still, the smartphone launch on Thursday is unlikely to have a material impact on Samsung’s stock price. This is because the company’s main profit maker is its lucrative semiconductor business, which sells memory chips used in smartphones, laptops, and data centers.

“Even so, this branded product division of Samsung, especially with these high-end products, is still very profitable for them and should continue to deliver in that sense,” said Ma, referring to Samsung’s IT and mobile communications business.

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