This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 20, 2020).
The world's largest smartphone maker is trying to jump-start lackluster sales of 5G handsets in the U.S., addressing the sticker shock that might have kept customers at bay.
Samsung Electronics Co.'s Galaxy A71, when it goes on sale Friday, represents the company's latest effort to boost flagging smartphone sales as Americans are feeling economic strain from the coronavirus pandemic and ensuing recession. The A71 will be the cheapest 5G-enabled phone in the U.S., retailing at $599.99, or about half the price of the flagship Galaxy S 5G line, which made its debut a few months ago.
Even before the pandemic, consumers were wary about the value of 5G, given limited coverage and fewer device options compared with what is available for older networks. With those receiving unemployment benefits in the U.S. at historically high levels and many people still tethered to Wi-Fi while sheltering at home, consumers see fewer reasons to switch over to 5G -- and pay for the privilege.
"What we're seeing from the economic situation and pandemic is that the 5G race to the bottom is accelerating, in terms of cost," said Wayne Lam, a freelance industry analyst. "We were expecting 5G to remain premium for a little longer, but with the market conditions and the carriers' requirements and the consumer needs, it's definitely coming down in cost a lot faster than with previous technology."
At the beginning of the year, 5G was still exclusively a feature for premium phones, limited to flagship offerings and commanding four-figure price tags. Samsung's Galaxy S20 Ultra offers four cameras, including a telephoto lens at the bottom with a folded zoom and prism at a cost of $1,400. China's Huawei Technologies Co., another leading equipment maker, similarly paired 5G capability with a Leica Camera AG-brand triple camera, a long-lasting battery and a roughly $1,240 price tag on its Mate 20X, sold abroad.
Samsung bet a particularly large amount on 5G, pushing to have the first devices on the market and then pouring money into a marketing campaign to excite potential customers.
Apple Inc., Samsung's largest rival in the U.S., is expected to unveil its first 5G iPhone this year. The company has already rolled out a cheaper version of its iPhone to attract price-sensitive shoppers.
Analysts had projected a rapid rise in 5G adoption in 2020. Then the pandemic struck, closing many retail outlets and forcing most Americans to work from home, dealing a blow to overall smartphone sales. Device shipments fell by nearly 20% last quarter compared with the prior year, according to Strategy Analytics, an industry research firm.
Samsung's phone shipments during that period plunged to 58.3 million devices, down more than 18% from a year earlier. It shipped only around 3.3 million 5G devices in the U.S., despite the splashy launch of the Galaxy S20 in February, according to Strategy Analytics.
In the U.S., 5G coverage remains spotty, and the nation's major wireless carriers have taken different paths to providing the connectivity. That has muddied the sales pitch to consumers trying to understand why they should open their wallets for 5G devices, especially absent a "killer app" that takes advantage of the new technology's vaunted speed advantage.
Even so, Samsung isn't giving up on trying to wow customers with features even on the discounted 5G handset. The A71 has four rear cameras and a 6.7-inch display, but it uses less-powerful chips and is housed in plastic rather than metal and glass to lower costs.
Carriers, too, are eager to boost weak sales and recoup some of the money they have invested in building these new networks, said Ken Hyers, a director at Strategy Analytics. "Operators are investing billions in rolling out 5G networks," he said. "If they don't get traffic on them, it's like building a superhighway and no one is driving on it."
Retail stores have started to reopen slowly since the height of the pandemic shutdowns -- at one point more than half of the major carriers' stores were closed. But restoring sales to their previous pace will be hard with activity at retail outlets still not fully restored, said Jeffrey Moore, who runs Wave7 Research, a telecom-industry research firm.
Analysts said they still expect 5G adoption to pick up, though likely toward the end of the year and after Apple's 5G-enabled phone launch.
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