Should Apple Fear Samsung's $2000 Foldable Phone?

Samsung Electronics Co. Ltd. (SSNLF) is attempting to officially displace its longstanding rival Apple Inc. (AAPL) as the most innovative maker of smartphones.

On Wednesday, the South Korean company unveiled the impressive new Galaxy S10 lineup, including a 5G model and the Wireless PowerShare feature, and Apple AirPods rivals called Galaxy Buds.

But the technology that garnered the most buzz was a 4.6 inch display foldable phone that opens up to become a 7.3 inch display tablet. The Galaxy Fold, which comes with six cameras and can operate three apps simultaneously, wowed onlookers and received plenty of plaudits from analysts.

"Galaxy Fold brings together material, engineering and display innovations, developed over eight years following the debut of Samsung’s first flexible display prototype in 2011," the company said in a press release.

Mark Newman, managing director for global memory, storage and electric vehicles at Bernstein, described it as a “game changer,” according to CNBC. Patrick Moorhead of Moor Insights & Strategy, meanwhile, admitted that he was “blown away” by the design, reported Channel News Asia.

Taking Premium Market Share From Apple

Smartphone sales hit a low point last year. Consumers refrained from spending big bucks on new premium models, opting to either hold on to older phones or purchase budget devices. Samsung hopes that its new phones offer enough innovative features to tempt people to loosen their purse strings, mindful that buyers have shown a preference for powerful devices to watch videos, play games, work and so forth.

Bloomberg's Mark Gurman, who has used the new Galaxy phones briefly, wasn't convinced that the company poses a significant challenge to Apple despite the new hardware. He tweeted, "Samsung is beating Apple to triple camera by 7 months, 5G and rear 3D by ~ 1.5 years, and screen design by ~1.5 - 2.5 years. But their software/services feels 1-2 years behind."

However, Moorhead is confident the Galaxy Fold is "Samsung's opportunity to take some premium market share from Apple." "Samsung always does better when they have something that Apple doesn't have that is valuable to consumers," he said, according to Agence France-Presse. Moorhead said the phone is good enough to rejuvenate Samsung’s mobile business and keep cheaper competitors such as China's Huawei Technologies Co Ltd. at bay. The analyst said innovation is critical in a mature market, adding that industry watchers thought the smartphone market was dead when Apple launched the iPhone in 2007.

Too Expensive?

Not all analysts were as positive as Moorhead. Many observers pointed out that the Galaxy Fold's nearly $2,000 price tag could prove to be a major stumbling block.

The main lesson that the smartphone market taught us last year was that consumers no longer want to spend big money on smartphones, particularly when companies such as Huawei and Xiaomi Corp. can offer decent models at a fraction of the cost. 

Bernstein's Newman told CNBC that while the foldable phone will not drive Samsung's bottomline this year, the launch was meant to introduce the technology and will lead to "big upside" when they go for a more aggressive price point eventually.

The Galaxy Fold’s high price prompted Brokerage Hana Investment & Securities to predict that Samsung will sell 2 million foldable phones this year, according to Channel News Asia. Another brokerage forecast that shipments will reach 1 million — less than 1% of the 291 million smartphones Samsung sold last year.

"Due to price, it's likely to be sold mainly to early adopters. Prices are key to expanding sales," Kim Yong-serk, a professor at Sungkyunkwan University in Korea and former Samsung mobile executive, told Channel News Asia. "It will help Samsung burnish an image as an innovative company, but it is unlikely to be profitable.”