Unpacking The Foldables’ Opportunity
This week, at its August Unpacked event, Samsung launched its foldable smartphones: Galaxy Z Flip4 and Galaxy Z Fold4, together with two new smartwatches, the Galaxy Watch 5 and the Galaxy Watch 5 Pro, and the new Galaxy Buds Pro 2. While the smartwatches and earbuds are exciting upgrades, the show’s star was the foldables.
The Galaxy Z Flip4 build stays true to the original design while adding more customization through a more capable Cover Screen and the Bespoke option. It also sports a larger battery and an upgraded camera experience now optimized for the most popular social apps. The Galaxy Z Fold also improves on its iconic design with a hinge that makes the phone tighter and a screen that improves in aspect ratio without growing the device’s overall footprint. But the real improvement for the Z Fold is on multitasking, now made easier by being the first phone running on Android 12L, with a dedicated taskbar and a longer list of optimized apps. The Z Fold also improves on its camera, which has an upgraded 50MP wide lens and 30x Space Zoom lens. This is a critical purchase driver in previous models felt a step down from the latest Galaxy S model. With a larger pixel size and a 23% brighter sensor, users can now enjoy “nightography” – Samsung’s term for night photography. In addition, the camera UX has improved to support a variety of modes, such as the larger Zoom map activated on Capture View Mode, Dual Preview, and Rear Cam Selfie, all custom-built to take advantage of the Z Fold’s form factor.
Both phones run on Qualcomm’s latest chipset, the Snapdragon 8+ Gen. Thanks to a newly signed multi-year agreement between the two companies, Snapdragon is the chipset of choice globally, not in selected markets only as it used to be, and this will be the case for all Samsung’s higher-end devices. Given battery life, overheating, and a weaker performance had been the main complaints from users with Exynos-based devices, this change is great news for Flip4 and Fold4 potential buyers in European and Asian markets. I also expect the deal to lend itself to deeper collaboration that could lead to better optimization around features such as the camera. While not called out on stage, it is also worth highlighting that both the Flip4 and Fold4 have Qualcomm’s FastConnect 6900 and, for the first time, Wi-Fi 6E already confirming that deeper integration.
The prices of the new models remain the same as last year in the US, which considering currency, supply chain constraints and the current geopolitical environment, is a win for prospective buyers, and I am sure a conscious effort by Samsung, given the deliberate push in taking foldables mainstream.
As with any other new flagship phone, many pictures have been posted comparing the Z Flip4 and Fold4 to their predecessors in a game of “spot the difference.” But consumers might struggle to see much difference for both devices as Samsung has focused on hardware enhancements to improve usability while keeping its original formula the same. While some industry watchers might lament a lack of “design innovation” in trying different form factors that push the boundaries of a phone and an origami experiment, I appreciate the discipline to stick to designs that have proven durable and engaging. This is the discipline that favors more affordable pricing and provides more peace of mind to mainstream consumers, who are always more pragmatic buyers compared to early adopters.
The Market Opportunity
President & Head of MX Business, Dr. TM Roh, penned a blog leading up to Unpacked saying that the industry shipped “almost 10 million” foldable smartphones in 2021, up 300% from 2020. Of all foldables sold by Samsung, almost 70% were Z Flip. This is not surprising given the price and the lower learning curve associated with the Flip. Market expectations are for foldables to reach 25-30 million by 2024, a forecast achievable if prices decline a little further and the ecosystem of apps optimized for the Fold increases.
Samsung is no stranger to making categories. In 2011 with the launch of the first Galaxy Note, it created the “phablet” category, which kicked off the trend of larger smartphones which soon became the norm. Applications are an even more critical ingredient to user satisfaction than in 2011. This is why I was delighted to hear Samsung talk about app optimization during the launch event. As foldables move into the mainstream, they must give consumers a reason to buy them. This is probably truer for the Fold than the Flip, which is more of a lifestyle device. Higher productivity does not come from a larger screen alone but from better multitasking and applications that take full advantage of the larger display. This is why, to me, the emphasis on Microsoft Office optimization as well as Instagram, TikTok, Spotify, and Netflix is an excellent sign, as is the fact that the Fold is running Android 12L, the first Android version designed for larger screens.
While I don’t believe every smartphone user needs a foldable, I do think that foldables will become mainstream as our lives are more and more dependent on digital workflows for work, entertainment, shopping and more. I also believe that, as we move into the Metaverse, and early adopters will gladly embrace glasses and goggles, foldables might be the way into the Metaverse for mainstream users.
It is impossible to discuss foldables and their higher price tag without putting them into the current economic environment. As we are at the very beginning of the mainstream push, I do not believe the economic recession in the US will negatively impact the category as early adopters tend to be more affluent consumers. There might be a slight impact on the enterprise side for the Fold, as businesses are starting to pull the purse’s strings, but the reality is that foldables have so far been BYOD or on the approved device list for executives.
Lastly, it is also impossible to talk about a smartphone category without wondering what Apple might be doing. Speculations here run wild, with 2024 as the most likely time frame and an iPhone expected to have a larger display than the current Fold. My crystal ball is fuzzy, but I wonder if Apple could test the category first on an iPad rather than an iPhone, and I am pretty intrigued by such a product, I must admit.