Better Late Than Never
Samsung Electronics (005930.KS) has made a lot of noise recently with the release of its newest foldable smartphones the Galaxy Z Fold and the Galaxy Z Flip, but while the press is certainly beneficial for the company, foldable devices are only a small part of Samsung’s mobile business which has been under considerable pressure this year. In fact, as we noted recently (see our note 08/05/21) that the mobile division’s performance was under a detailed review that would likely lead to either a structural change or a management upheaval as Samsung’s Vice-Chairman resumes his leadership responsibilities. With weakness across the smartphone market, Samsung has had to reduce its expectations for smartphone shipments from an optimistic 290m to 300m units to a more conservative 260m.
In order for Samsung to meet its revised shipment expectations, the company will begin production of the Galaxy S21 FE smartphone this month for release in the next few weeks, which puts it about four months later than originally expected. Shortages of components, particularly application processors, has held back production for the S21 FE and has also affected shipments of the company’s A series smartphones, which are the company’s most popular phones. Samsung has originally expected to ship ~15m S21 Fes but has lowered those expectations to between 10m and 12m this year. Samsung will begin production of the 2022 flagship Galaxy S22 line in November, but shipments will not begin until January of next year.
Now that 5G smartphones have become commonplace and carry little or no premium pricing, the smartphone business returns to ‘feature’ competition although the trend of adding additional cameras to such devices seems to have played itself out. There are some features that brands hope will set them apart in 2022, such as under-display cameras, but there are few new technology features that can be applied to typical smartphones that will make them suddenly more attractive next year. Foldables are certainly the most attractive new segment, but Samsung’s goal of selling ~7m of the Z Fold/Flip 3 series is admirable but represents only 2.7% of Samsung’s revised shipment goal, meaning that while 2021 might be called the year of the foldables, in a global market of ~1.3b units foldables don’t move the needle. Without the high volume workhorse smartphones like the S21 FE (Galaxy S20 FE sells for ~$700), or the Galaxy A series, which range in price from $425 down to $110, selling well, Samsung’s mobile division is going to struggle again next year, and while we expect component shortages to ease in 2022, any release delays will only make matters worse.
In order for Samsung to meet its revised shipment expectations, the company will begin production of the Galaxy S21 FE smartphone this month for release in the next few weeks, which puts it about four months later than originally expected. Shortages of components, particularly application processors, has held back production for the S21 FE and has also affected shipments of the company’s A series smartphones, which are the company’s most popular phones. Samsung has originally expected to ship ~15m S21 Fes but has lowered those expectations to between 10m and 12m this year. Samsung will begin production of the 2022 flagship Galaxy S22 line in November, but shipments will not begin until January of next year.
Now that 5G smartphones have become commonplace and carry little or no premium pricing, the smartphone business returns to ‘feature’ competition although the trend of adding additional cameras to such devices seems to have played itself out. There are some features that brands hope will set them apart in 2022, such as under-display cameras, but there are few new technology features that can be applied to typical smartphones that will make them suddenly more attractive next year. Foldables are certainly the most attractive new segment, but Samsung’s goal of selling ~7m of the Z Fold/Flip 3 series is admirable but represents only 2.7% of Samsung’s revised shipment goal, meaning that while 2021 might be called the year of the foldables, in a global market of ~1.3b units foldables don’t move the needle. Without the high volume workhorse smartphones like the S21 FE (Galaxy S20 FE sells for ~$700), or the Galaxy A series, which range in price from $425 down to $110, selling well, Samsung’s mobile division is going to struggle again next year, and while we expect component shortages to ease in 2022, any release delays will only make matters worse.
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