Will the foldable phone boost Samsung’s earnings?

Will the foldable phone boost Samsung’s earnings?

The Korean tech giant is expected to announce the commercial availability of its flagship foldable device with Infinity Flex display next month. The much anticipated foldable smartphone is expected to be a hot seller, but will it stop the declining sales of Samsung’s Galaxy series? Analysts doubt it.

The foldable Infinity Flex display was first demoed during the Samsung Developer Conference in San Francisco last November. It was disguised by a black box to hide it’s actual dimensions and design. Nevertheless it drew massive attention from the press and huge interest from the public. Samsung promised to unveil more specs and commercial availability during its upcoming Unpack event that will take place in London and San Francisco simultaneously and will be streamed live across the world.

But will it save Samsung’s declining Galaxy sales? Industry analysts have there doubts. Here’s why. The biggest problem with flexible displays is that they’re very hard to produce, so production capacity is limited. Whereas hundreds of millions of regular LCD and OLED displays can be manufactured annually, the production capacity for flexible screens is around a million maximum this year. In fact, Samsung sold a whopping 280 million smartphones last year. So even if the Galaxy F (or whatever the device will be called) will be in huge demand, Samsung will not be able to deliver to all those customers.

Limited capacity

Because of this limited production capacity, Samsung is expected to ask a high price of the handset (somewhere between $1000 and $2000). This will maximise the initial revenue, while at the same time have a decelerating effect on the demand. If Samsung can sell 1.000.000 phones at an average wholesale price point of $1000, the estimated 2019 revenue will be in the range of 1 billion USD. That’s a fraction of the current Galaxy-series sales and of the total annual revenue of 200 billion dollars.

Samsung has trouble maintaining high margins across its smartphone division with increasing competition from iPhones, as well as cheaper phones made by Chinese rivals including Huawei. Samsung saw declining profits last year for the first time in two years, following lacklustre sales of its high-end smartphones.

Samsung’s second-quarter earnings report revealed its profit declined nearly 5 percent, to $13.3 billion, with revenue down 3 percent, to $54 billion.

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