The won-dollar exchange rate remains in the 1,400 won range, increasing the likelihood of a price increase for Samsung Electronics' upcoming smartphone model, the Galaxy S25, scheduled for release in January next year. This is due to rising expenses for purchasing components paid in U.S. dollars.
The price hike due to the super strong dollar, known as the 'king dollar,' adds to the burden on domestic consumers and raises concerns about sluggish sales in the early phase of the product launch. However, in key markets such as the United States and Europe, Samsung Electronics may actually enhance its price competitiveness, suggesting a dual-edged sword effect.
◇ 'Possibility of price increase for the Galaxy S25 due to rising won-dollar exchange rate'
According to the industry on the 11th, the domestic launch price of the Galaxy S25, scheduled for late January next year, is expected to be higher than that of its predecessor, the Galaxy S24. Yang Seung-soo, a researcher at Meritz Securities, noted, "The recent increase in the won-dollar exchange rate over the past month has led to a rise in the costs of components (raw materials) purchased in U.S. dollars, increasing the likelihood that Samsung will raise the domestic launch price of the Galaxy S25. This is a prediction considering only the exchange rate impact," he explained. He added, "If the actual increases in component prices, including the rise in prices for Qualcomm's mobile application processors, are fully reflected, the price increase could be much larger than last year." Qualcomm is known to have raised mobile application processor prices by about 30% annually.
High exchange rates have historically impacted Samsung Electronics' product launch prices. In December 2022, Samsung Electronics unexpectedly raised the price of its tablet PC, the Galaxy Tab S8 Ultra, by up to 220,000 won. This drastic measure was taken as high exchange rates persisted, causing component price increases to be unsustainable. In October 2022, Apple's iPhone 14 launch price in Korea also increased by 160,000 to 260,000 won compared to its predecessor. While Apple kept new product prices stable in the global market, they raised prices for products launched domestically. In contrast, the domestic launch prices of the Galaxy S22 (released in February 2022) and Galaxy Flip and Fold 4 (released in August 2022) did not change from the previous year.
An industry insider mentioned, "There is a tendency for sales to be concentrated in the first two months after a product launch, so in a situation where high exchange rates continue, it will be difficult for Samsung Electronics to bear losses and keep the launch price of the Galaxy S25 unchanged." However, he also noted, "An increase in prices could raise consumer burdens and impact sales, which will be a concern for Samsung Electronics as well."
Kim Rok-ho, a researcher at Hana Securities, stated, "Simply fluctuating exchange rates alone are unlikely to lead Samsung to raise launch prices," and added, "The significance of South Korea in terms of sales volume is not large enough to merit concern over domestic price increases."
◇ High exchange rates enhance price competitiveness overseas
There are analyses suggesting that high exchange rates can enhance export competitiveness in overseas markets, aiding sales in key regions for Samsung Electronics' smartphones, such as the United States and Europe. Although Samsung relies on external companies like Qualcomm and Google for mobile application processors and operating systems, making it challenging to lower production costs, it could benefit indirectly from reduced prices for new products in the U.S. and Europe.
Looking at the performance of Samsung Electronics' MX division (including the network business) during the high exchange rate period, the sales in the third and fourth quarters of 2022 amounted to 59.110 trillion won, which is 7.4% higher than the 55.040 trillion won in the stable exchange rate periods of the third and fourth quarters of 2023. Yang Seung-soo at Meritz Securities explained, "The stronger the dollar earned from product sales abroad, the greater the amount converted into won, which enhances price competitiveness overseas."
Meanwhile, on the 10th, the won-dollar exchange rate stood at 1,430 won, a 10% increase from January's 1,300 won. The won-euro exchange rate on that day was 1,507.79 won, up 6.1% from 1,420 won in January.