"Self-sufficiency is thriving, but offline..." Galaxy Note20, 'polar opposites' with minimal subsidies

[Image source=Yonhap News]

[Asia Economy Reporter Joselgina] "They just look around the devices and leave."

The new Samsung Galaxy Note20 series, officially launching tomorrow, is struggling to gain traction in offline sales and at dealerships. The three mobile carriers, having faced massive 5G fines, have adopted a cautious stance by setting 'stingy' official subsidies at about half the level of the previous model, and they are not expected to increase these subsidies anytime soon.

This contrasts sharply with the pre-order frenzy driven by consumers purchasing smartphones directly through online channels and activating them under the 'self-sufficiency' system.

According to industry sources on the 20th, the official subsidies set by the three carriers for the Galaxy Note20 pre-orders are only 170,000 to 240,000 KRW based on the highest 5G rate plan. This is about half of the maximum 450,000 KRW offered during the Note10 launch. Furthermore, the carriers have decided not to increase subsidies even after the official launch on the 21st. Since the Korea Communications Commission's corrective order compliance period has not ended, and with large-scale 5G facility investments and frequency reallocation issues expected in the second half of the year, they intend to refrain from aggressive marketing.

This atmosphere is clearly reflected in offline sales locations. An employee at dealership A in Yeongdeungpo-gu, Seoul, said, "Because 5G devices require maintaining expensive rate plans, most customers just look around and leave," shaking their head, adding, "The pre-order frenzy is only an online story." Another employee at dealership B said, "There are some phone inquiries," but added, "We expected the Galaxy Note20 series launch to bring changes, but there hasn't been any significant (sales) change yet. The subsidies need to go up a bit," trailing off.

The current retail prices for the Galaxy Note20 standard and Ultra models are 1,199,000 KRW and 1,452,000 KRW, respectively. The standard model is about 50,000 KRW cheaper than the previous Galaxy Note10's retail price of 1,248,500 KRW. However, considering the halved carrier subsidies, the actual amount consumers have to pay when purchasing is tens of thousands of KRW higher. Moreover, since the carriers recently faced fines from the Korea Communications Commission over illegal 5G subsidies, dealerships and sales points are also more reluctant to spend on marketing.

Unlike the pre-order period, when the self-sufficiency system has a large share, sales effects after the official launch tend to continue only if carrier subsidies are released. This is why Samsung Electronics, on the eve of the official launch, remains concerned that despite the pre-order frenzy confirmed during the pre-order period, it might miss the golden sales period. The stark contrast between online and offline atmospheres makes it uncertain whether the pre-order success will continue.

The pre-order sales volume of the Galaxy Note20 series from July 7 to 13 reached about 90% of the previous model's sales during the same period. Despite the impact of the novel coronavirus (COVID-19), this was considered a good performance, thanks to the self-sufficiency sales boom through online channels. An industry insider pointed out, "The key question is whether this boom will continue in sales after the official launch, where the share of sales and dealerships is higher." He added, "The three carriers and distribution channels have limited room to increase official subsidies or bonuses."

The cautious approach of the three carriers and distribution channels is expected to continue for the time being. The three carriers, who previously received corrective orders including large fines due to illegal 5G subsidies, could face criminal charges if illegal subsidies are detected again during the compliance inspection period. The Korea Communications Commission has not yet submitted a compliance inspection plan. Another industry insider said, "It is expected to take at least one or two months until the compliance inspection and the end of the compliance period," adding, "For the manufacturer Samsung Electronics, this is a dilemma as the initial golden period to boost sales is included in this timeframe."

This content was produced with the assistance of AI translation services.