Cellphone makers switch to budget handsets after law change
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South Korea’s mobile phone makers are breaking away from their premium-oriented smartphone lineups to churn out cheaper phones as consumers are more price-conscious due to tougher subsidy rules, industry watchers said Wednesday.
Samsung Electronics Co. recently rolled out its latest mid-end phone, the Galaxy A8, at an about 20 percent discounted price compared with the flagship Galaxy S6, and the budget phone Galaxy J5 for less than 300,000 won (US$259).
It also started selling the Galaxy Folder, with a price tag similar to the J5 model, which is designed to woo older generations, who need fewer features.
Samsung’s move came after the Galaxy Grand Max, a low-end model that was released in January, became a smash hit in Korea, with 700,000 units sold so far, watchers said.
LG Electronics Inc., Samsung’s smaller rival, has also been bolstering its budget phone lineup, unveiling five new models this year, including the LG Volt, the G style and the LG Bello II.
Industry watchers said such a shift in their lineup strategy is attributable to the enactment of a new law in October last year, which caps the phone subsidies that mobile carriers can provide to retail stores at 330,000 won.
Although the law was revised to restrict excessive incentives that had led to cutthroat competition, it has prompted consumers to look for cheaper phones because of the reduced subsidies.
As part of a bid to diversify portfolios, SK Telecom Co., the top mobile carrier in the country, is apparently mulling launching a cellphone rental service in a joint project with its information technology service unit.
If the rental business kicks off in Korea in fall as widely forecast, it will bring a significant change in the market landscape as it will be an unprecedented move and affect other rivals, market watchers said.
Skeptics, however, played down its growth potential because the device has more personal elements like banking details and photos compared with other common rental products.
Questions & Answers
Q.What specifically caused South Korean mobile phone makers to change their strategy to focus on budget handsets?
What specifically caused South Korean mobile phone makers to change their strategy to focus on budget handsets?
The shift in strategy is due to a new law enacted last October. This law caps the phone subsidies mobile carriers can offer to retail stores at 330,000 won, making consumers more price-conscious.
Q.What specific models has Samsung Electronics released as part of its move towards cheaper phones?
What specific models has Samsung Electronics released as part of its move towards cheaper phones?
Samsung has released the mid-end Galaxy A8, discounted by about 20% compared to the S6. They also launched the budget Galaxy J5 and the Galaxy Folder, both priced similarly to the J5.
Q.Which specific competitor of Samsung has also begun to strengthen its budget phone range?
Which specific competitor of Samsung has also begun to strengthen its budget phone range?
LG Electronics Inc., Samsung's smaller rival, has also been bolstering its budget phone lineup. They have unveiled five new models this year, including the LG Volt, the G style, and the LG Bello II.
Q.What new service is SK Telecom Co. Reportedly planning to introduce to the market?
What new service is SK Telecom Co. Reportedly planning to introduce to the market?
SK Telecom Co. Is reportedly considering launching a cellphone rental service. This project would be in conjunction with its information technology service unit, aiming to diversify its portfolios.
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