Samsung doubles down on foldables as it leaves Note behind

Samsung Electronics,  South Korea’s largest company,  is pouring more money into its gamble that folding phones will become the next big thing as it projects a surge in sales of the novel handsets.

Foldable sales are expected to increase by several times in 2021 from the previous year and continue significant growth in 2022, Samsung said Thursday without providing a specific forecast. Its display division is expanding foldable panel production and making supplemental investments to preemptively address what the company sees as rising demand for the category.

“We think that we have succeeded in starting and leading the mainstreaming of foldables in the market,” vice-president Sung-koo Kim from the company’s mobile division said during a conference call to discuss earnings on Thursday.  

The South Korean electronics giant launched the third-generation Galaxy Z Fold and Galaxy Z Flip in August, breaking new ground by pricing the smaller device at $999 and promising to put the full force of its global marketing juggernaut behind the category. Powered by the Z Flip 3, the line-up sold a million units in South Korea at the fastest pace for any Samsung smartphone in two years, the company has said. 

Samsung is counting on the devices to lead the charge against Apple’s perennial best-selling iPhone this holiday season. It skipped releasing a Note device in 2021 and instead used its late-summer launch window to put the focus squarely on its foldables. 

The push into a novel smartphone form factor paid off for Samsung a decade ago when it introduced the Galaxy Note. It pioneered the larger screen sizes common today and differentiated its devices with a unique stylus that’s since also shown up in Apple’s iPads and Microsoft’s Surface devices. The Note series has reliably sold in the millions of units each year but its distinctiveness has faded over the past decade and the company decided not to release a new model this year, instead adding a stylus to the Z Fold 3 and making room for foldables to take over.

Foldable smartphones are widely expected to become the fastest-growing phone category, with Counterpoint estimates pointing to tenfold growth by 2023. Samsung may hold three-quarters of that market in the coming years as it commands the supply of the most advanced foldable displays, the researchers said. 

Arch-rival Apple has tested foldable iPhone prototypes, Bloomberg News previously reported, but none are imminent on the company’s product road map. Others like Xiaomi  and Oppo are still watching from the sidelines while Motorola has found limited success with its foldable Razr.

The company’s third-quarter profit exceeded analysts’ estimates after a prolonged semiconductor shortage boosted prices of memory and system chips that go into computers and mobile devices.

Net income rose to 12.06-trillion won ($10.3bn) in the three months ended September. Analysts predicted 11.54-trillion won on average, according to estimates compiled by Bloomberg.

The world’s biggest maker of memory chips and smartphones has benefited from strong demand as the global economy recovers from the Covid-19 pandemic, with rising semiconductor prices providing an added boost.

The group said semiconductor shortages will last into 2022.

Still, memory-chip prices may start to cool this quarter as customers are less anxious to place new orders after stockpiling inventories.

Samsung said component shortages at some customers may affect chip demand, while also predicting robust demand for servers and personal computers to continue. It flagged rising raw material costs as a risk for profitability.

Bloomberg News. More stories like this are available on bloomberg.com