The premium price equation for Samsung Galaxy devices is shifting as the company said it "will be offering the Note 9 at reasonable prices in order to maximize sales."
Indeed, Samsung's Note 9 launch Aug. 9 will be notable not for specifications and features but for pricing. During Samsung's second quarter earnings conference call, executives noted the following:
- Galaxy 9 sales didn't fare as well in the second quarter.
- Samsung is feeling the pinch from low-end competitors.
- The premium smartphone space is struggling as Apple and Samsung have tagged the upper end of the pricing equation with the iPhone X and Galaxy 9 Plus, respectively.
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KyeongTae Lee, head of Samsung's mobile business, said:
We aim to expand the sales of flagship models via an earlier-than-usual release of a new Galaxy Note, which offers exceptional performance for a reasonable price. We will also strengthen price competitiveness and actively adopt advanced technology in our mass models to aggressively respond to market condition. Offering more sophisticated specs throughout our lineup will make it difficult to maintain profitability.
Samsung mentioned the word "reasonable" enough to position itself as a premium/value play. Samsung is playing a high/low game where it aims to maintain pricing on its flagships and take a loss on low-end models to fend off Android rivals.The big question is what price is reasonable. A leaked circular has the Note 9 below the $1,000 mark, but perhaps the real competition is sub-$500 devices with solid and good enough features.
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The company is betting that smartphone and tablet demand will increase in the second half.
It's unclear how that bet will pay off, but remember Samsung also benefits from component sales. Even if Galaxy devices miss estimates, Samsung benefits from the screens, processors and storage that goes into devices. For instance, Samsung executives were asked whether they can shift more of their DRAM capacity to image processors now that triple cameras are being added to smartphones. The answer from an executive, translated from Korean, broke down like this:
Regarding the triple camera, the triple camera offers various advantages, such as optical zoom or ultra-wide angle, also extreme low-light imaging. And that's why we're expecting more and more handsets to adopt triple cameras not only in 2018 but next year as well. By next year, about 10% of handsets are expected to have triple cameras, and triple camera adoption will continue to grow even after that point. Given this market outlook, actually, we've already completed quite a wide range of sensor lineup that can support the key features such as optical zoom, ultra-wide viewing angle, bokeh and video support so that we're able to supply image sensors upon demand by customers.
Given the talk of high-end specs at reasonable pricing rest assured Samsung will be throwing more cameras at its devices and utilizing more of its component advances.