Cutting the Fat
As the world’s largest smartphone brand, Samsung presents consumers with a large variety of smartphones at as many price points as possible, but while the aim is to capture every possible smartphone buyer, be it a potential $116 M04 series buyer or a $1,150 Z Fold series buyer, presenting such a wide variety of models and price points can become an expensive proposition from both a production cost perspective and a marketing perspective. The chart below shows the number of models that Samsung has offered each year since 2016 compared to normalized (2016) global smartphone shipments and those of Samsung alone. It can be seen that while global and Samsung’s own smartphone shipments declined between 2018 and 2022 (we assume a flat 4Q ’22), the number of models offered by Samsung increased until 2021 when offerings began to be reduced, now falling below the 2016 starting point and nearing the low point seen in 2017.
Given the prospects for a weak 1Q ’23 and relatively flat global smartphone shipments this year, we expect that Samsung will reduce the number of models it offers again this year, particularly for those lines where volumes have been decreasing. We expect there will be a new foldable model released this year, likely a double folding smartphone, but we also expect the flagship ‘S’ line to be narrowed to two, rather than three models, as rumors that Samsung has abandon 2023 development of the Galaxy S+ line to concentrate on the better selling ‘regular S’ and the Galaxy S Ultra, which has replaced the former Galaxy Note line, also cannibalized by the Galaxy Fold series. Samsung’s Mid-priced Galaxy A series and the lower priced Galaxy M series have some price overlaps, so we would expect to see at least two model eliminations in those series, after the A40 and M40 series were eliminated last year.
All in, Samsung needs to continue to focus on best selling models in each series to keep its own component inventory levels low, along with those of its OED/OEM partners, especially given the increases seen in component costs last year. All things to all people is a great philosophy but it doesn’t take into account the inventory, marketing, and stocking costs associated with smaller volume models, and against a backdrop of relatively weak overall smartphone volume growth, the necessity to focus on higher margin and higher volume models becomes even more important. We expect 2023 will see an overall continuing reduction in the number of smartphone models Samsung offers, with an emphasis on the top and bottom models in each smartphone price tier.
Given the prospects for a weak 1Q ’23 and relatively flat global smartphone shipments this year, we expect that Samsung will reduce the number of models it offers again this year, particularly for those lines where volumes have been decreasing. We expect there will be a new foldable model released this year, likely a double folding smartphone, but we also expect the flagship ‘S’ line to be narrowed to two, rather than three models, as rumors that Samsung has abandon 2023 development of the Galaxy S+ line to concentrate on the better selling ‘regular S’ and the Galaxy S Ultra, which has replaced the former Galaxy Note line, also cannibalized by the Galaxy Fold series. Samsung’s Mid-priced Galaxy A series and the lower priced Galaxy M series have some price overlaps, so we would expect to see at least two model eliminations in those series, after the A40 and M40 series were eliminated last year.
All in, Samsung needs to continue to focus on best selling models in each series to keep its own component inventory levels low, along with those of its OED/OEM partners, especially given the increases seen in component costs last year. All things to all people is a great philosophy but it doesn’t take into account the inventory, marketing, and stocking costs associated with smaller volume models, and against a backdrop of relatively weak overall smartphone volume growth, the necessity to focus on higher margin and higher volume models becomes even more important. We expect 2023 will see an overall continuing reduction in the number of smartphone models Samsung offers, with an emphasis on the top and bottom models in each smartphone price tier.
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