
South Korea’s major telecommunication companies are closely monitoring Samsung Electronics’ upcoming smartphone subscription service, AI Subscription Club, concerning its potential impact on the domestic handset distribution market.
Samsung has been operating the service since last month to lease AI-powered home appliances, monitors and TVs. Starting next month, mobile devices will be added to the lineup, according to industry sources Thursday.
AI Subscription Club allows customers to pay leasing fees for its AI-powered appliances in installments over three to five years. During the subscription period, customers benefit from services such as free repairs and a maintenance service.
If customers choose to cancel the subscription early, the leased product is immediately retrieved. Upon completing the full subscription term, ownership of the product is transferred to the customer.
Due to the relatively lower cost and shorter usage cycle of smartphones compared to appliances, a new subscription pricing model tailored to mobile devices is anticipated.
“We have not yet outlined specific details for the smartphone subscription service,” a Samsung Electronic official said. “We, however, have experience operating a program called, the Galaxy Club, which offered benefits such as trade-in guarantees and discounts on new device purchases when customers returned their old phones.”
The introduction of this subscription service is expected to increase the proportion of open market devices on the market, which could lead to a decline in telecom carriers’ handset sales revenue, sources said.
In 2023, the combined annual handset sales revenue of the three major telecom companies was estimated at around 10 trillion won ($6.9 billion). If 10 percent of customers transition to Samsung’s subscription service, it could result in a revenue loss of over 1 trillion won.
While Samsung’s AI Subscription Club for smartphones is likely to appeal to customers due to its convenience and additional benefits, its market impact will depend on factors such as its partnerships and value-added services.
“Given typical smartphone usage patterns, this subscription service might not differ significantly from telecom companies’ existing 24-month installment plans,” said a telecom company official who requested anonymity. “However, the inclusion of free repair services could lead to a decrease in telecom carriers’ insurance products.”
Another anonymous telecom carrier official said, “Since subscriptions are centered around additional services, telecom operators may still offer more competitive pricing for smartphone purchases. However, if Samsung combines smartphones with other home appliances in bundled packages, the competitive landscape could shift dramatically.”
By Jie Ye-eun (yeeun@heraldcorp.com)