Samsung Starts Selling Its Cheaper 5G Phone -- WSJ
June 20 2020 - 3:02AM
Dow Jones News
By Elizabeth Koh
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 20, 2020).
The world's largest smartphone maker is trying to jump-start
lackluster sales of 5G handsets in the U.S., addressing the sticker
shock that might have kept customers at bay.
Samsung Electronics Co.'s Galaxy A71, when it goes on sale
Friday, represents the company's latest effort to boost flagging
smartphone sales as Americans are feeling economic strain from the
coronavirus pandemic and ensuing recession. The A71 will be the
cheapest 5G-enabled phone in the U.S., retailing at $599.99, or
about half the price of the flagship Galaxy S 5G line, which made
its debut a few months ago.
Even before the pandemic, consumers were wary about the value of
5G, given limited coverage and fewer device options compared with
what is available for older networks. With those receiving
unemployment benefits in the U.S. at historically high levels and
many people still tethered to Wi-Fi while sheltering at home,
consumers see fewer reasons to switch over to 5G -- and pay for the
privilege.
"What we're seeing from the economic situation and pandemic is
that the 5G race to the bottom is accelerating, in terms of cost,"
said Wayne Lam, a freelance industry analyst. "We were expecting 5G
to remain premium for a little longer, but with the market
conditions and the carriers' requirements and the consumer needs,
it's definitely coming down in cost a lot faster than with previous
technology."
At the beginning of the year, 5G was still exclusively a feature
for premium phones, limited to flagship offerings and commanding
four-figure price tags. Samsung's Galaxy S20 Ultra offers four
cameras, including a telephoto lens at the bottom with a folded
zoom and prism at a cost of $1,400. China's Huawei Technologies
Co., another leading equipment maker, similarly paired 5G
capability with a Leica Camera AG-brand triple camera, a
long-lasting battery and a roughly $1,240 price tag on its Mate
20X, sold abroad.
Samsung bet a particularly large amount on 5G, pushing to have
the first devices on the market and then pouring money into a
marketing campaign to excite potential customers.
Apple Inc., Samsung's largest rival in the U.S., is expected to
unveil its first 5G iPhone this year. The company has already
rolled out a cheaper version of its iPhone to attract
price-sensitive shoppers.
Analysts had projected a rapid rise in 5G adoption in 2020. Then
the pandemic struck, closing many retail outlets and forcing most
Americans to work from home, dealing a blow to overall smartphone
sales. Device shipments fell by nearly 20% last quarter compared
with the prior year, according to Strategy Analytics, an industry
research firm.
Samsung's phone shipments during that period plunged to 58.3
million devices, down more than 18% from a year earlier. It shipped
only around 3.3 million 5G devices in the U.S., despite the splashy
launch of the Galaxy S20 in February, according to Strategy
Analytics.
In the U.S., 5G coverage remains spotty, and the nation's major
wireless carriers have taken different paths to providing the
connectivity. That has muddied the sales pitch to consumers trying
to understand why they should open their wallets for 5G devices,
especially absent a "killer app" that takes advantage of the new
technology's vaunted speed advantage.
Even so, Samsung isn't giving up on trying to wow customers with
features even on the discounted 5G handset. The A71 has four rear
cameras and a 6.7-inch display, but it uses less-powerful chips and
is housed in plastic rather than metal and glass to lower
costs.
Carriers, too, are eager to boost weak sales and recoup some of
the money they have invested in building these new networks, said
Ken Hyers, a director at Strategy Analytics. "Operators are
investing billions in rolling out 5G networks," he said. "If they
don't get traffic on them, it's like building a superhighway and no
one is driving on it."
Retail stores have started to reopen slowly since the height of
the pandemic shutdowns -- at one point more than half of the major
carriers' stores were closed. But restoring sales to their previous
pace will be hard with activity at retail outlets still not fully
restored, said Jeffrey Moore, who runs Wave7 Research, a
telecom-industry research firm.
Analysts said they still expect 5G adoption to pick up, though
likely toward the end of the year and after Apple's 5G-enabled
phone launch.
-- For more WSJ Technology analysis, reviews, advice and
headlines, sign up for our weekly newsletter.
Write to Elizabeth Koh at Elizabeth.Koh@wsj.com
(END) Dow Jones Newswires
June 20, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.