Samsung Electronics (SSNLF) may have discovered a huge new growth market for its priciest smartphones, and it’s not just in the biggest cities of India.
The company said its Galaxy Z Fold8 Ultra, Galaxy Z Fold8, and Galaxy Z Flip8 received more than 271,000 pre-orders in India within 72 hours of their launch on July 22.
Last year, Samsung took 15 days to hit a similar preorder total for the Galaxy Z Fold7 and Flip7. So the new lineup reached the milestone five times as fast, although the company did not disclose the sales mix between the three devices.
The more telling figure may be who placed the orders.
Samsung said 45% of the orders came from tier 2 cities and smaller markets, The Economic Times reported. This means demand for premium foldable phones is growing beyond wealthy consumers in India’s largest cities.
The stock angle is simple. Samsung said boosting profitability in its mobile business will come from sales of flagship models, upselling, and a richer premium mix.
But the preorder total doesn’t prove shoppers are accepting the full prices for the phones. Samsung offered cashback, upgrade incentives, and even no-cost financing for up to 30 months with no down payment, sales that could have made the devices far easier to order.
The early demand is encouraging. The real test is whether Samsung can convert it into profitable, completed sales.
“We are observing the rise of a promising growth market with significant potential,” Samsung Southwest Asia CEO JB Park said.
Samsung’s foldable lineup creates several ways to trade up
Samsung’s new lineup runs the gamut from premium prices.
The Galaxy Z Flip8 kicks off at around $1,300 and the Fold8 at approximately $1,900. The Fold8 Ultra starts at about $2,100 and gets much more expensive as you add storage.
That range provides Samsung and its retail partners with multiple opportunities to upsell customers into higher-priced goods.
Flip8 is the most affordable way to get started with foldables. Fold8 is aimed at customers who want multitasking and entertainment. Fold8 Ultra adds an eight-inch display, a 200-megapixel camera, and more advanced productivity features.
What Samsung investors should watch
- Whether preorder customers complete their purchases
- How sales divide among the Flip8, Fold8 and Fold8 Ultra
- Whether demand holds after launch incentives expire
- How many customers rely on extended financing
- Whether the Ultra expands demand or cannibalizes the Fold8
That product ladder can help improve Samsung’s sales mix, when the benefits of upgrading are obvious to shoppers.
It can also be confusing.
It can be hard for customers to distinguish the Fold8 from the Fold8 Ultra, particularly when both are already at the very top end of the smartphone market. Some of the customers who would have bought Samsung’s most expensive model in the past might go for the cheaper Fold8 instead.
Samsung’s preorder record comes with a pricing catch
Samsung has said that premium smartphones are key to driving profitability in its mobile business.
Its Mobile eXperience and Networks units posted 38.1 trillion won in revenue and 2.8 trillion won in operating profit in the first quarter. Samsung claimed a higher mix of premium products boosted sales and profit, albeit with the division still achieving just single-digit profits.
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Management has focused on flagship-led sales, upselling, and a broader premium portfolio.
Early foldable demand favors that method. The promotions, however, come with a critical condition.
Samsung has given upgrade perks, cash back, or longer monthly payment options to some Fold8 and Fold8 Ultra purchasers. Flip8 purchasers received scaled-down versions of those incentives.
These kinds of discounts can increase the number of customers and entice shoppers to buy more expensive setups. They might also cut the effective selling price or bring up demand that would have emerged later in the year.
Preorders also are not the same as recognized income.
Samsung does not provide cancellation rates, completed deliveries, finance utilization, or order totals by model. Without those data, the 271,000 number should be viewed as an early demand indicator, not a financial breakthrough.
Bloomberg / Getty Images
Samsung must turn early excitement into lasting profit
The bullish take is that foldable phones are getting closer to mainstream.
Samsung hit the preorder mark in one-fifth the time of last year, and nearly half the orders came from outside the biggest cities. That mix suggests premium foldables may have a larger addressable market than investors believed.
The careful reading is that Samsung drew forward future purchases into the preorder period by throwing in generous financing and launch incentives.
Which interpretation is correct will depend on the sales mix.
A surge led by the Fold8 Ultra could push ASPs higher, enhancing Samsung’s premium positioning. A launch with more of the lower-priced models or a large proportion of subsidized sales would be a less attractive profit signal.
Samsung’s semiconductor business is the key earnings driver for the company, so one smartphone launch will not dictate the stock’s direction.
But the foldable rollout is an important test of Samsung’s consumer strategy.
The company has a history of getting people excited about expensive gadgets. Now it needs to show that customers are actually buying, paying more for the pricier models, and continuing to buy once the promotions are gone.
Samsung’s foldable phones are now reaching customers quicker. The next challenge is to make sure the profits come just as fast.