Samsung's Folding Phone Business Faces Headwinds: Industry Downturn or Internal Issues?

Samsung's Folding Phone Business Faces Headwinds: Industry Downturn or Internal Issues?Against a backdrop of homogenization in smartphone design and hardware specifications, foldable phones have emerged as the biggest innovation in recent years. Large foldable phones combine the functionality of both smartphones and tablets, ideal for multitasking, while smaller foldables prioritize sleek design

Samsung's Folding Phone Business Faces Headwinds: Industry Downturn or Internal Issues?

Against a backdrop of homogenization in smartphone design and hardware specifications, foldable phones have emerged as the biggest innovation in recent years. Large foldable phones combine the functionality of both smartphones and tablets, ideal for multitasking, while smaller foldables prioritize sleek design. Despite their high price tags, foldable phones remain popular with consumers. However, Samsung, a global leader in the mobile phone industry, is facing challenges in its foldable phone business. Android Authority reported that Samsung plans to scale back its foldable phone lineup next year due to a cooling market and will launch the lighter Galaxy S25 Slim to counter the market downturn. This contrasts sharply with the booming Chinese market for foldable phones, where Huawei's Mate X series is even experiencing shortages, with buyers needing to pay thousands of extra dollars to acquire them. This raises the question: Is the overall foldable phone market truly slowing down? Is Samsung's predicament solely due to external factors, or are there internal issues at play?

To answer this, we must analyze the broader foldable phone market using data.

Domestic Market: Flourishing Growth

According to CINNOResearch, domestic foldable phone sales reached 3.54 million units in Q3 2024, a year-on-year increase of 79%, and 8.52 million units cumulatively in the first three quarters, a 101% year-on-year increase. While IDC's data shows some discrepancies, both firms indicate steady growth in domestic foldable phone sales, although the year-on-year growth rate slowed in Q3. These differences may stem from varying statistical methodologies, but overall, both datasets point to a robust domestic market. IDC predicts approximately 52.4% overall growth for the domestic foldable phone market in 2024, with a slower growth rate in subsequent years, but continued steady growth at least until 2028.

Global Market: Slower Growth, but Potential Remains

Counterpoint Research data shows a 1% year-on-year decline in global foldable phone sales in Q3 2024, ending six consecutive quarters of year-on-year growth. However, a closer examination reveals that among the top five brands (Xiaomi, Honor, Lenovo-Motorola, and Huawei), most maintained high growth rates, with only Samsung experiencing a significant 21% year-on-year decline. Despite this, Samsung remains the global leader with a 56% market share. Samsung's dominance means any fluctuation in its performance significantly impacts the entire industry. The market share it relinquishes is readily available for other brands to capture.

Overall, the foldable phone industry shows continued growth, with leading brands demonstrating strong year-on-year sales increases. Stagnant growth in some other brands may be attributed to other factors. For instance, OPPO's Find N series enjoyed positive reviews and ranked fourth domestically in Q2 2024, but due to a generation-behind SoC chip compared to competitors, OPPO adjusted its product line, delaying the launch of a new foldable phone until the expected release of the Find N5 series in Q1 2025.

Reasons for Samsung's Decline: Internal Issues Outweigh External Factors

Samsung's declining foldable phone sales cannot be solely attributed to the broader market environment. Several internal factors are at play:

1. Insufficient Product Strength: The Samsung Galaxy Z Fold6 and Galaxy Z Flip6 offer middling specifications lacking standout features. In folded mode, they are approximately 20% thicker than the Huawei Mate X6 without corresponding improvements in battery capacity or camera performance. While the user experience is highly customizable, users often need to consult the manual to fully understand its functions.

2. High Pricing: Samsung's foldable phones are overpriced. The Galaxy Z Fold6 starts at $1899.99, and the Galaxy Z Flip6 at $1099. Compared to Chinese manufacturers, Samsung's pricing is significantly higher, targeting primarily developed economies like Northern Europe, Western Europe, the US, and South Korea, which have comparatively smaller market sizes.

3. Poor Performance in the Chinese Market: While Samsung's sales in China are weak, its market share is not insignificant. IDC data shows Samsung ranked fourth in the Chinese foldable phone market in Q3, ahead of vivo and OPPO. However, fierce domestic competition has led to aggressive price wars and rapid technological iteration. Samsung's high-priced, uninspired products are becoming increasingly less competitive in the Chinese market.

4. Strategic Miscalculations: Despite its leading position in the foldable phone market, Samsung has not actively enhanced the competitiveness of its Galaxy Z Fold/Flip series amidst intensifying competition. Instead, it plans to reduce its foldable phone portfolio, a perplexing decision. Investment is always more crucial than cost-cutting; reduced investment could lead to Samsung surrendering market share.

Intensifying Industry Competition: Hard Power Determines Success

IDC data indicates that the foldable phone market is transitioning away from rapid growth, with increasingly fierce competition. Samsung's declining sales stem primarily from insufficient product strength. This goes beyond design, hardware specifications, and price, encompassing aspects like user experience.

Future Directions for Foldable Phones: Slimmer Designs and Lower Prices

Foldable phones have made significant strides in slimness in recent years, approaching the weight of standard flagship phones. Apart from potentially weaker telephoto lenses and battery life compared to standard flagships, there are few other significant drawbacks. For users with less demand for telephoto capabilities, the viewing and multitasking experience of foldable phones far surpasses standard flagships. Smaller foldable phones also offer advantages in terms of elegance and price, potentially attracting a larger female consumer base.

Future Outlook: Opportunities for Chinese Brands

Although global foldable phone market growth is slowing, significant potential remains. The Chinese market presents ongoing challenges for Samsung, and the successes of Lenovo-Motorola in North America and Honor in Western Europe further pressure Samsung. Samsung's defensive posture is detrimental to future competitiveness and may lead to continued market share erosion. Samsung needs to increase investment, improve its hardware and software specifications and user experience, and enhance competitiveness through price reductions or the introduction of lower-priced models.

Chinese brands also face challenges and opportunities. With Apple on the sidelines and Samsung scaling back production, Chinese brands have a chance to expand their market share. However, continued innovation and accelerated international expansion are crucial for Chinese brands to compete effectively with Samsung.

January 7th, 2025 marks the opening of CES 2025, a key event for observing industry trends.