South Korea’s 5G leadership threatened by Wuhan Coronavirus

As a result of the Wuhan Coronavirus, South Korea is slipping from its lead in the global next-generation 5G telecom services, with the pandemic cooling consumer sentiments for costs and quality.

Earlier this year, South Korea’s telecom operators led by SK Telecom and KT Corp had launched the world’s first 5G services with South Korea’s Samsung Electronics stole a march on equipment makers globally by launching the first 5G phone around the same time.

But with spotty 5G coverage, expensive handsets and with the Wuhan Coronavirus thunking consumer demand, the hype over 5G services has gone down considerably.

Sales of Samsung’s brand new 5G-ready Galaxy S20 smartphones, which were launched at the end of February with high price tags of $1,308.81 (1,595,000 won), are now down by nearly 30% in South Korea compared with early sales of its previous S10 series, said an official at a South Korean operator.

Typically, sales of newly released models soar right after the product launch, said the official.

The slowdown of 5G services in South Korea underscores the impact that the Wuhan Coronavirus is having on the South Korean economy. It is to be seen how other smartphone makers, including Apple Inc, react to this trend.

Apple is scheduled to launch 5G phones later this fall and is counting on 5G for a sales boost following two years of industry-wide contraction.

The contraction of 5G services is also likely to impact the deployment of futuristic services including self-driving cars and fully automated factories.

Countries such as France, Spain, Italy, and Austria have postponed the sale of 5G auctions because of the Wuhan coronavirus.

In contrast, China’s 5G sales are expected to recover in the second quarter. This could be a boost for Chinese companies such as Huawei, said Tom Kang, an analyst at research firm Counterpoint.

Samsung has a limited presence in China and sells most of its premium 5G phones in other markets.

In February 2020, according to government data, South Korean carriers added around 400,000 new 5G customers, an increase of 290,000 from the previous month. But according to analysis, this is a subdued number given Samsung’s S20 launch; it was less than half the 880,000 recorded in August 2019.

Operators and handset makers will have to rely on fresh subsidies to revive demand, which could erode their bottom lines, said analysts.

South Korea had counted on Samsung to take an early lead in the 5G phone market and expected an expansion in Samsung’s marketshare in other major markets, including the European Union, and the United States, ahead of Apple’s launch of its 5G enabled iPhone in the fall; the Wuhan Coronavirus however set back such plans, said analysts.

U.S. retailers are already offering a 20% discount for online sales of the Samsung S20 with unlocked S20 devices being sold for $799.99 on Best Buy and Amazon.com Inc, marking a $200 discounts from its original price of $999.99.

In mid-March, Samsung’s Chief Executive told shareholders that demand for 5G smartphones is expected to rise this year.

According to a telecom source, Samsung plans on launching more affordable 5G smartphones such as the A71 series in Korea in the first half of this year,

“Consumers are cautious about buying new phones, because of little perceived differences between 4G and 5G phones and price hike from 4G phones, especially with the virus dampening consumer sentiment,” said Kim Hoi-jae, an analyst at Daeshin Securities. “Therefore, handset makers are expected to launch budget 5G phones faster.”

“In times like this, changing your phone is not just a priority,” said a manager at a phone retail store in Seoul.

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