SEOUL—The world’s largest smartphone maker is answering a 12 months of rising inflation and rising element prices with a tactical transfer: holding down costs.
Within the business’s first main launch of the 12 months,
Samsung Electronics Co.
launched three variations of its flagship Galaxy S22 units on Wednesday. The costs stay the identical as final 12 months: the bottom mannequin will retail for $800, whereas the bigger Galaxy S22+ will price $1,000. The highest-of-the-line Galaxy S22 Extremely, that includes a 6.8-inch display and an “S Pen” stylus, is priced at $1,200.
Costs world-wide are rising at their quickest charges in a long time as the prices of uncooked supplies, elements and transport surge. Roh Tae-moon, president of Samsung’s cellular enterprise division, mentioned he’s prepared to abdomen the additional prices to woo a wider vary of patrons, following a 12 months of sluggish cargo progress for the South Korean tech big.
“The pricing was a strategic choice,” Mr. Roh mentioned. “Our prime precedence was to make sure that our customers really feel our units are inexpensive and accessible.”
The worldwide smartphone business flickered again to life in 2021, exhibiting annual progress for the primary time in 4 years. World-wide smartphone shipments nudged up 4% to 1.4 billion models final 12 months, although remained beneath pre-pandemic ranges, in response to Counterpoint Analysis, a tech-market researcher. Element shortages stymied what might have been a stronger 12 months.
‘Our prime precedence was to make sure that our customers really feel our units are inexpensive and accessible,’ says Roh Tae-moon, president of Samsung’s cellular enterprise division.
Photograph:
Kimberly White/Getty Pictures
It wasn’t way back that Samsung and
Apple Inc.
—the 2 dominant gamers within the premium smartphone market—lifted the bottom costs of their flagship units to $1,000. Some clients have paid the large bucks for the units, although the mass market has most popular a cheaper price tag. Customers are holding on to their present units longer, too.
Apple saved the worth of its iPhone 13 the identical because the prior 12 months’s mannequin at $800, a transfer that business analysts say helped the corporate drive file gross sales and income within the ultimate months of final 12 months. Samsung additionally noticed a lift to final 12 months’s Galaxy S21 shipments after flattening the worth by $200.
Staying placed on pricing, regardless of revenue pressures attributable to key materials prices rising, caters to a wider viewers and will woo some patrons hesitant to improve, mentioned Tom Kang, a Seoul-based analysis director at Counterpoint. Not pricing aggressively above the prior 12 months’s mannequin or the chief competitors eases the acquisition choice, he mentioned.
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Not all phonemakers have the monetary clout or branding to carry off on value hikes. The typical wholesale value for smartphones has risen by 2% or much less in recent times. However in the course of the first three quarters of 2021, the costs rose 10% from the prior 12 months, in response to Technique Analytics, a market analysis agency. They’re anticipated to rise once more this 12 months by 5%.
This displays the differing ranges of wiggle room, with Apple and Samsung having cushier revenue margins of 30% to 40%, whereas midtier or finances gamers, like
Xiaomi Corp.
, taking markups usually of 10% or much less, mentioned Wayne Lam, director of analysis at CCS Perception, a know-how advisory agency.
“The marketplace for smartphones has consolidated into the ‘haves’ and ‘have nots’ over time,” Mr. Lam mentioned.
The trio of Galaxy S22 telephones boasts a extra highly effective processor, quicker charging instances and cameras higher geared up to take photographs in lowlight settings. The bottom mannequin has a show that measures 6.1 inches diagonally, whereas the Galaxy S22+ is available in at 6.6 inches. The telephones hit cabinets within the U.S., South Korea and Europe on Feb. 25.
“It’s the standard adjustments—quicker processors, higher cameras. In that sense, it’s extra of an incremental improve than something revolutionary,” mentioned Bryan Ma, vp of units analysis at Worldwide Knowledge Corp.
Samsung is predicted to promote roughly 30 million models of the Galaxy S22 units this 12 months, in response to Counterpoint forecasts, assuming the present chipset shortages don’t unexpectedly worsen. It could be an enchancment from the roughly 28 million models bought of the prior 12 months’s mannequin.
Samsung noticed a lift to final 12 months’s Galaxy S21 shipments after flattening the worth by $200.
Photograph:
jung yeon-je/Agence France-Presse/Getty Pictures
Annual smartphone shipments globally are forecast to rise 7% in 2022 from the prior 12 months to round 1.5 billion models, with 5G serving to drive gross sales throughout all value ranges, in response to Counterpoint. That will surpass pre-pandemic ranges.
Samsung’s cellular division had a rocky 12 months. When chip shortages had been acute final fall, the corporate’s third-quarter smartphone shipments fell by 14% from the prior 12 months, in response to Counterpoint. A extra inexpensive model of its Galaxy S21, which was anticipated to launch in the midst of 2021, solely grew to become obtainable final month.
After a 12 months of supply-chain challenges, Mr. Roh, the Samsung cellular enterprise chief, mentioned the corporate is in a greater place now. For example, it’s placing longer-term contracts with element suppliers that decide to orders additional out upfront and optimizing transport routes.
“Amid uncertainties, we realized we wanted these adjustments,” Mr. Roh mentioned.
Write to Jiyoung Sohn at jiyoung.sohn@wsj.com
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