Parts Suppliers Stand to Benefit
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
Initial sales of the Galaxy Z Flip have been stronger than expected. We positively view the fact that supply is already in shortage not only in Korea, but also in countries such as the US and UAE. Noting this trend, there is a high possibility that related markets will expand at an accelerated clip.
Z Flip receiving favorable response both in Korea and overseas
Samsung Electronics (SEC)’ second foldable smartphone, the Galaxy Z Flip, went on sale in Korea and in some overseas countries (including the US and UAE) on Feb. 14. We have confirmed that early sales are significantly higher than those of the Galaxy Fold, a development that is leading to a supply shortage. While the initial supply shortage of the Fold was aggravated by quantity control issues (supply limited to a few thousand units), the Z Flip is experiencing a supply shortage even though initial inventories stood as high as 20,000 units. As supply volume is set to expand, the shortage should quickly fade. We positively view the strong order demand.
Although the success of the Z Flip does not necessarily mean a sharp surge in foldable smartphone shipments in 2020, the heightened possibility of rapid related market growth should positively impact not only SEC, but also related value chains. We expect KH Vatec, Segyung Hitech, BH Flex, SKC Kolon PI, and Innox AMC to benefit.
Lower price and different form factor are reasons for success
We attribute the strong demand for the Z Flip to its appealing new form factor, and the fact that it is W800,000 cheaper that SEC’s first foldable smartphone, the Galaxy Fold.
The biggest strengths of the Z Flip are that: 1) it is much lighter and smaller than the Fold, making it more portable; and 2) the handset offers superior durability, as its display cover uses ultra-thin glass (UTG) rather than colorless polyimide (CPI). And, unlike the Fold, the Z Flip will be sold globally, which should benefit its sales figures.