Pre-order Underway for Galaxy Z Fold 2
The authors are analysts of NH Investment & Securities. They can be reached at kyuha.lee@nhqv.com, hwdoh@nhqv.com and j.ko@nhqv.com, respectively. – Ed.
Offering an entirely different form factor experience to users, SEC rolled out its first foldable phone Galaxy Fold last year, marking the beginning of the global foldable smartphone market. SEC then continued to push ahead with its foldable phone initiative, debuting its new foldable offering called Galaxy Z Flip with greater portability. Today, a pre-order has been underway for Galaxy Z Fold 2, a sequel to its first foldable phone. In our view, in spite of its hefty price tag, sales of SEC’s foldable smartphone models will come in better than feared, with the new smartphones to become one of SEC’s flagship models from 2021.
We note that actual sales of SEC’s previous foldable models the Galaxy Fold and the Galaxy Z Flip exceeded market expectations. But, in absolute volume terms, both models’ sales were somewhat marginal, affected by: 1) limited production capacity for the Galaxy Fold; and 2) UTG production capacity limit and Covid-19 for the Galaxy Z Flip. In this regard, we believe that the Galaxy Z Fold 2 will be the first foldable model that can test actual success probability of the foldable smartphone market. Customer response to the new phone could be confirmed only after the pre-order figures are released, but we remain upbeat towards the Galaxy Z Fold 2’s market performance, noting that the updated model compensates for many of its predecessor’s shortcomings (such as small front display size and thick bezel). While the new phone still comes with a high price tag, we predict demand will be sufficient given its limited production volume. In addition, SEC’s special refund program for old Galaxy Fold users (up to W1mn in refund for their old phones) should help to stimulate replacement demand from old Galaxy Fold users.
We note there remain several technological challenges for foldable smartphones such as screen crease, stylus pen application, and water resistance function. However, by end-2021, we believe these issues are all to be resolved. Among domestic parts makers, we offer KH Vatec (an exclusive hinge supplier for SEC’s foldable smartphones) as our top pick, and we also draw attention to Fine Technix (metal plate), BH Flex (RF-PCB), and Innox AMC (process materials), and DKT (display process materials/parts). In particular, Innox AMC, BH Flex, and DKT are expected to supply digitizer-related parts to SEC once a stylus pen function is added from 2021.