Samsung gears up for a foldable future as Xiaomi continues to build pressure

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This is usually the time when we are eagerly waiting for Samsung to introduce the new Note series smartphones. That phone (or phablet or whatever you call it) had a cult following. But, 2021 is different. The South Korean electronics giant has decided to move on and put an end to the iconic Note line-up. Instead, it will now be focusing on the foldable and flip smartphones with Galaxy Z Fold 3 and Galaxy Z Flip 3 launching later this evening.

Samsung has been planning this transition for a while and rumours of it killing the Note series starting emerging last year itself. However, even the Korean electronics maker had not predicted the circumstances under which this switch will happen.

Only a week ago, a new Counterpoint report confirmed that Xiaomi has dethroned Samsung as the top smartphone seller in the world for June 2021. This was preceded by Samsung’s decline in the European market, where again, Xiaomi grabbed the top spot for Q2 2021. And, at a time when Samsung would ideally want to regain some lost ground, it doesn’t have its biggest weapon the Note.

Samsung’s jump towards the foldable segment is inspired by the fact that this is probably the future. Numbers suggest the same too. Research firm Strategy Analytics has projected that foldable smartphone shipments will grow from less than 1 million units in 2019 to 100 million by 2025. So maybe in four years, Samsung will be leading the race again. But what about now?

It would be naive to expect the Fold and Flip smartphones to sell in huge numbers at least in 2021. The form factor remains a niche, has had issues with the first two generation devices and above all, costs a lot making them the most expensive handset you can buy. Even if Samsung is able to address some of these issues with the Galaxy Z Fold 3 and Galaxy Z Flip 3, you can’t expect them to offer similar value for money as a Mi 11 Ultra or OnePlus 9 Pro does.

Obviously, most people will choose a flagship phone over a half-baked, fancy device.

Panic among Samsung

I have used all three Samsung foldable phones Galaxy Fold, Galaxy Flip and Galaxy Fold 2. The last was probably closest to perfection. Yet, still very far. It needs major improvements and the price needs to come down drastically from Rs 1.5 lakh. One motivation to spend on a foldable phone would be the support for S Pen. That brings a whole new productivity angle to the foldable form factor and nearly allows you to use the device as a tablet. But, nearly.

In its second quarter earnings call, Samsung executives made it clear that they will promote foldable devices in a big way to prime sales. The goal: “Increase volume to achieve economies of scale” and optimise design to hit solid profitability.

But, there is a sense of panic among the smartphone maker too, who has always found a way to bounce back for setbacks. Remember the Note 7?

It is apparently not too happy about the performance of Galaxy S21 series in the international market and has initiated a “special review” into its mobile business. The assessment will be a bit different from the regular “periodic reviews” Samsung conducts across its business verticals. This kind of review can often result can result in a complete audit of the business.

Rise of Xiaomi

One of the biggest pains for Samsung has been the continuous rise of Xiaomi. The Chinese smartphone maker was quick to move after Huawei’s demise in the smartphone business but, has seen a remarkable turnaround in the last one year, where it has not only continued to dominate the affordable smartphone segments but, has started to establish itself as a premium device maker. The Mi 11 Ultra has been received well and Xiaomi has already launched the first smartphone in the world with Snapdragon 888+ SoC – Mi Mix 4.

Xiaomi went past Samsung in India the second largest smartphone market a few years ago. It has further added to the pain by beating the Korean company globally. As per Counterpoint Research for June 2021, Xiaomi has accounted for a 17.1% share of sales versus Samsung’s 15.7%.

In an ideal scenario, you would expect a powerhouse like Samsung to respond in the next quarter. But, that seems unlikely. Samsung has been hit hard as a new wave of Covid-19 affected its smartphone production in Vietnam, resulting in shortages of Samsung phones across online and offline outlets. This particularly had an impact on the mid-range A series devices, giving Xiaomi a window to take advantage of the situation.

To make matters worse, Samsung doesn’t have the Note series to recover. The next S series smartphones come early 2022. This practically gives Xiaomi a six-month window to further strengthen its position in the global market. The process has started with the launch of Mi Mix 4 even though this one seems to be a China specific phone.

Still, Xiaomi has shown that it can beat Samsung and has more tricks in its sleeves while the Korean counterpart has taken a punt on the foldable devices. Samsung also faces threat from Apple which is also prepping to introduce the iPhone 13 series sometime next month. Will foldable be enough? Time will tell.

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