Samsung S20 sales fell 30% amid the epidemic, and South Korea's 5G first-mover advantage may be lost

Beijing time, April 3, consumers' interest in 5G technology has declined due to concerns about cost and quality. Now, the COVID-19 pandemic has further cooled this enthusiasm. These factors make it difficult for South Korea to maintain its leading position in the world's next-generation 5G telecommunications services.

Figure 1: Samsung Galaxy S20

Exactly one year ago, South Korean telecom operators, led by SK Telecom and Korea Telecom, launched the world's first 5G services. South Korean mobile phone giant Samsung Electronics also took the lead in releasing its first 5G mobile phone almost at the same time, ahead of other equipment manufacturers in the world.

But after generous subsidies fueled early growth in 5G smartphones, the hype all but died down as consumers grew skeptical of the value of pricier phones and spotty 5G service. Now the coronavirus crisis has hammered demand.

Samsung S20 salesPoor

Samsung's new 5G Galaxy S20 phone went on sale in late February, with prices as high as 1.595 million won ($1,308.81). A South Korean operator executive said S20 sales in South Korea have fallen by about 30% compared with early sales of the previous generation S10. Typically, new phones tend to see a surge in sales in the early stages of their launch.

The slowdown in 5G deployment in South Korea shows how the coronavirus pandemic is hampering the global rise of 5G, which smartphone makers including Apple Inc are planning to launch this fall as they look to boost sales after two years of industry contraction.

The delay in 5G deployment could also affect future service plans such as self-driving cars, fully automated factories and cities. Due to the epidemic, Spain, Italy, France and Australia have postponed the auction of 5G spectrum.

On the contrary, China's 5G phone sales are expected to recover in the second quarter, boosting the business of Chinese companies such as Huawei, according to Tom Kang, an analyst at market research firm Counterpoint.

Xiaomi, which recently launched a new flagship 5G smartphone, said it was seeing signs of a sales recovery in China as social order begins to return to normal after the coronavirus lockdown. Samsung has a limited presence in China's smartphone market and sells most of its high-end 5G phones in other markets.

South Korea's 5G user growth is sluggish

South Korean operators added about 400,000 new 5G subscribers in February, up from 290,000 in the previous month, according to government data, but analysts point out that this is not a high number considering Samsung has already released the S20, which can drive 5G subscriber growth.

Figure 2: Monthly growth of 5G users in South Korea

South Korea’s 5G market began to slow in November as telecom operators cut marketing and pointed to growing customer dissatisfaction with spotty 5G network connections and a lack of differentiated content. Operators and phone makers must rely on new subsidies to revive demand, which will eat into their profits, analysts say.

Last year, Samsung placed its hopes on South Korea to gain a first-mover advantage in the 5G mobile phone market. Analysts believe Samsung is expected to expand 5G sales in other major markets such as the United States and Europe before Apple releases its 5G iPhone.

U.S. retailers have been offering discounts of about 20% on online sales of the S20, which just landed in the U.S. market a month ago. Samsung's unlocked S20 is currently priced at $799.99 at Best Buy and Amazon, a $200 discount from the original price of $999.99. Samsung declined to comment. A Samsung co-CEO told shareholders in mid-March that demand for 5G smartphones is expected to grow this year.

Samsung plans to launch low-cost 5G mobile phones

According to sources from the telecommunications industry, in order to boost sales of 5G mobile phones, Samsung plans to launch cheaper 5G smartphones, such as the A71 series, in South Korea in the first half of this year.

"Consumers are cautious about buying new phones because 5G phones feel similar to 4G phones and are priced much higher than 4G phones, especially as the epidemic has affected consumer confidence," said Kim Hoi-jae, an analyst at Daeshin securities. "As a result, mobile phone makers are expected to launch low-priced 5G phones at a faster pace."

According to data released by South Korea today, there were 86 new confirmed cases in South Korea, bringing the total number of confirmed cases in the country to 10,062. Although the number of new confirmed cases in South Korea has declined from its peak, consumers are still cautious about buying new mobile phones.

"Changing phones is not a priority during times like this," said a manager at a mobile phone retail store in Seoul.