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Smartphones

Samsung to ramp up production capacity of foldable devices by 50%

Foldable smartphones become Samsung's main weapon to widen market leadership against Apple and Xiaomi

By Aug 30, 2021 (Gmt+09:00)

Samsung's third-generation foldable Galaxy Z Flip 3
Samsung's third-generation foldable Galaxy Z Flip 3

Samsung Electronics Co. will expand the production capacity of foldable devices amid an unexpected global craze over its Galaxy Z Fold 3 and Z Flip 3 products.

According to the industry on Aug. 30, Samsung’s display unit Samsung Display Co. will increase its annual production capacity of foldables by 47% from the current 17 million to 25 million. Samsung will kick off the expansion project at its Bac Ninh plant in Vietnam within the second half of this year, targeting full operation by the end of this year or early next year at the latest.

Experts say that once Samsung completes the expansion, the company will be able to produce 10 million units of Z Fold models and 15 million units of Z Flip models a year.

Samsung’s decision to ramp up capacity is mainly driven by soaring market demand. Its third-generation foldable models recorded 920,000 pre-orders in South Korea, 1.8 times more than its latest smartphone Galaxy S21. The number of pre-orders for the new foldable phones was even higher in China with more than 1 million.

Sources report that the pre-orders in the US also surpassed Samsung’s second-generation foldable device sales in the country between January and July of this year.

“Samsung’s factories that make foldable devices are already operating at full capacity. Samsung has no option but to expand its facilities. It will likely add three more production lines to its current seven, which will allow the company to manage the production volume more flexibly,” said a source close to Samsung.

Samsung’s success in the foldable sector came at its third try. Its first-generation foldable device, Galaxy Fold, launched in 2019 sold only 500,000 units globally. The company last year launched the second-generation devices, Galaxy Z Fold 2 and Galaxy Z Flip, which also sold about 1.5 million units in the world.

On the other hand, Samsung has already produced more than 3 million units of Galaxy Z Fold 3 and Z Flip 3 in the past two months to meet skyrocketing demand, by operating its plants at the full capacity of 1.5 million units a month.

Galaxy Z Fold 3 boasts a wide 7.6-inch display that allows users to engage in multiple tasks simultaneously.
Galaxy Z Fold 3 boasts a wide 7.6-inch display that allows users to engage in multiple tasks simultaneously.

The market research firm Display Supply Chain Consultants (DSCC) projected in June that the display industry will produce 8.9 million units of foldable displays this year. DSCC in August raised its projection sharply to 10.4 million due to growing demand for the Samsung devices. The firm’s projection figures for 2022 stands at 16.4 million units.

“Samsung will lead the smartphone industry, as the new foldable form factor becomes more familiar and prevalent among global consumers,” said Kiwoom Securities head of research Kim Ji-san.  

Consumer experts highlight that design was a key success factor of Samsung’s third-generation foldables compared to the earlier products. They note that Apple is the market leader among South Korean millennials largely due to its design and its value as a fashion item. The experts noted that a large portion of the country’s millennials are saying that Samsung Galaxy Z Flip 3’s design is better than Apple's.

“Samsung, up to its second-generation models, failed to persuade consumers why they needed to fold and unfold their phones. But the new models largely resolved this issue with innovative designs,” said a smartphone industry official.

Samsung's third-generation foldable devices have become fashion items among Korean millenials. 
Samsung's third-generation foldable devices have become fashion items among Korean millenials. 

Galaxy Z Flip 3, which folds up and down, provided a reason to fold by increasing the area of its cover display fourfold versus the previous model. Thus, unlike the previous model with which users could not do much with the phones the folded state, Galaxy Z Flip 3 allows consumers to take selfies and make digital payments even when folded.

Galaxy Z Fold 3, which can be folded sideways, boasts a 7.6-inch display on which the users can engage in multiple tasks at the same time, from watching videos to writing notes with an S-pen.

Samsung Galaxy Z Fold 3 Thom Browne edition.
Samsung Galaxy Z Fold 3 Thom Browne edition.

Price was another pull factor. Samsung reduced the prices of the Z Fold 3 and Z Flip 3 models by about 400,000 won ($340) from those of its second-generation models launched last year.

FOLDABLE MODELS TO SPEARHEAD CHALLENGE AGAINST APPLE, XIAOMI

Samsung Electronics, a long-time leader in the global smartphone market, is closely followed by Apple and Xiaomi. Samsung’s market share dropped from 21.1% in the first half of 2019 to 19.8% in the first half of 2021. During the same period, Apple’s share rose from 11.2% to 16.0% and Xiaomi’s share from 8.6% to 14.9%.

Industry watchers note that Samsung is outperformed by Apple in the flagship or premium segment, and by Xiaomi in the value-for-money (VFM) segment. They say that Samsung’s long-term strategy is to make foldables the norm and even the default form factor among smartphones in the future.  

The foldable phones are expected to grow at multiple rates in the coming years. The market research firm Strategy Analytics (SA) forecasted in May that 13 million foldable phones will be sold worldwide in 2022 and 37 million in 2023. Another research firm Counterpoint Research projected in June that the figure will grow from 9 million units this year to 30 million by 2023.

If these projections are accurate, the foldable phones will claim similar levels of market share to those held by Samsung’s most successful smartphones such as Galaxy S10 and S20 that respectively sold 36 million units and 28 million units globally in their first year of launch.

Write to Byung-keun Kim and Min-jun Suh at bk11@hankyung.com

Daniel Cho edited this article.

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