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Interview

Samsung smartphone chief: 5G jolt will revive market

Koh Dong-jin says leaps in virtual reality and AI will beckon 'renaissance'

Samsung last month showed off 5G-capable devices as the ultra-fast networks draw closer to commercial use on a wide scale.   © Reuters

SEOUL -- The fifth generation of cellular technology will bring a "breakthrough" in smartphone sales, Samsung Electronics' co-CEO told Nikkei recently, saying the high-speed networks will birth new markets in conjunction with artificial intelligence and virtual reality.

AI and 5G "will beckon in a smartphone renaissance" in the next three years, said Koh Dong-jin, who is the South Korean tech giant's information technology and mobile communications chief. With commercial 5G services set for full-scale launches this year in major markets like the U.S. and South Korea, "the skill device-makers show in 2019 and 2020 will heavily impact their futures," he continued.

Smartphone sales have been slowing amid a slump in the Chinese market and a stall in major tech innovations that has dampened consumers' desire to upgrade their old devices. A shot in the arm from 5G could reinvigorate a market whose growth has lifted a range of industries, including semiconductors.

The global smartphone market shrank 4% to 1.4 billion shipments for 2018, according to U.S. research company IDC. Samsung remained in charge with a share exceeding 20%, but its shipment volume shrank by 8%, double the decline in the market overall. The global market is expected to slide by nearly 1% during 2019, confirming the end of a growth spurt that had lasted since the 2007 launch of Apple's iPhone. The semiconductor market likewise shrank in January in an indication of the far-reaching knock-on effects.

The idea is gaining traction that smartphones may become less profitable for existing manufacturers as the devices follow televisions and personal computers down the path to commoditization.

Samsung co-CEO Koh Dong-jin shows off the new Galaxy Fold smartphone at an event in San Francisco on Feb. 20. Samsung co-CEO Koh Dong-jin shows off the new Galaxy Fold smartphone at an event in San Francisco on Feb. 20.   © AP

"We agree that were it not for 5G, smartphones would become increasingly viewed as commodities, and we've been hurrying to cut costs," said Koh.

But 5G will enable a wave of more powerful games and high-definition virtual reality experiences and lure buyers toward new phones, Koh said. He asserted that "the crisp video offered by 5G will eliminate" the problem of dizziness some experience when using VR for long periods on existing networks. Factories, schools and medical facilities will boost demand for smartphones to pair with VR equipment, he predicted.

Still, "Smartphones alone won't be enough for the 5G age," said Koh, pointing to the necessity of linking a range of products like wearable tech and smart speakers. "The winners will be the businesses that enrich consumers' lifestyles" through the application of resources like data, he added.

"Samsung's vertically integrated business model, which covers everything from semiconductors to auto parts, will help sharpen our competitive edge" in next-generation tech, Koh said. He added that businesses with strong knowledge of electronic parts that handle data "are well-positioned, in terms of development speed, to help give birth to innovative services like automated driving and remote medical treatment."

In China, which is about 30% of the global smartphone market, "we've been having a difficult time these past two or three years," Koh said, though he expressed hope that "we can recover through organizational and personnel changes." Samsung claimed just a 0.6% share of the Chinese market by shipments for October-December, research firm data suggests.

The executive was more upbeat on India, pointing out that "we still hold a leading market share on a value basis" there despite falling behind Chinese rivals in shipment volume. "We have an over-50% share in premium devices" in India, Koh said, adding that a January product launch on Samsung's Indian website sold its entire volume of 300,000 devices in five minutes.

Koh also said Samsung would strengthen its offensive in Japan ahead of the 2020 Summer Olympics in Tokyo. The company is set to show off a range of goods at an exhibition in the capital's Shinjuku business district on Tuesday, and Koh said it will release the Galaxy Fold, its first foldable phone, in Japan this year. The device is expected to include apps tailor-made for the Japanese market at the request of mobile carriers NTT Docomo and KDDI.

Despite the Galaxy Fold's steep price tag of around $2,000, Koh reported "positive feedback from telecom business partners," adding that some have asked for a larger share of the phone's limited supply.

Just days after Samsung unveiled the Galaxy Fold last month, Chinese rival Huawei Technologies answered by showing off its own foldable device, the Mate X. It garnered praise for factors including its slimmer body.

Asked about the decision to have the Galaxy Fold's screen fold inward, rather than outward around the body like the Mate X, Koh said he would refrain from commenting on competitors' products. But, he said, "two years ago, Samsung made a smartphone that folded outward. When we held the prototypes, we reasoned that having the screen constantly facing outward would make it more prone to small scratches."

He vouched for the simplicity of the Galaxy Fold's design, which he said was based on the concept of a book, to be closed for carrying around and opened for reading. "It should be easy to sell consumers on the idea: You just close it up to make phone calls, and open it up to watch a video or play a game," he said.

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