Samsung Galaxy S5: After A Low-Key Unveiling, Will The Phone Be Cheaper Than Its Competition?

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Features of the Galaxy S5 may not be enough to entice consumers at a time when smartphone saturation is kicking in.

Unlike its predecessors, the new Samsung (KRX:005935) Galaxy S5 was unveiled in a relatively low-key fashion, sharing the spotlight with products from companies such as Sony (NYSE:SNE), Huawei and HTC (TPE:2498) at the Mobile World Congress in Barcelona on Monday.

Now that the handset is official, a Korean news website has reiterated a rumor heard about the Galaxy S5 before its unveiling -- that the phone would come with a cheaper price tag compared to rival products such as the Sony Xperia Z2.

According to the report from ZDNet Korea, the hardware configuration of the new Galaxy S5 is lower than what the industry expected -- a strategy Samsung has reportedly employed to bring down the phone's cost. And, while Samsung is yet to reveal a price for the Galaxy S5, the report said that the company would disclose it only after consulting with international carriers.

Phone Arena reported that Samsung could decide to ship the Galaxy S5 at a discount to carriers, and by doing so, “eating some margin spread, and passing the savings down to consumers.”

Lee Young Hee, executive vice president of Samsung’s mobile business, reportedly said in a recent interview that the company would push for “very competitive pricing” on the Galaxy S5, acknowledging pressures from low-cost rivals. According to Lee, Samsung is striving for the “optimal mix of feature set and pricing point.”

The rumor of a lower price point for the Galaxy S5 surfaced last week when Bloomberg indicated the possibility in a report, saying that Samsung was still negotiating Galaxy S5 prices with carriers, and debating whether to make the new smartphone cheaper than its standard flagship launch tag.

Currently, the 16GB version of the previous Galaxy S4 is sold for $199.99 with a two-year contract and for $599.99 without a contract with Verizon Wireless (NYSE:VZ). By contrast, Motorola's Moto X, which comes with the same memory capacity, costs $399 without a wireless contract in the U.S.

The Wall Street Journal cited a Samsung executive in a report as saying that instead of going for the wow factor, the company wanted to enhance core features such as the camera, battery life, download speeds and protection against water and dust.

Although the Galaxy S5 features a fingerprint scanner and a heart-rate monitor among many other new features, some analysts believe the device could disappoint some consumers because it lacks bold innovations. 

According to the Journal, the Galaxy S5's features may not be enough to entice consumers at a time when the smartphone market is saturated with products and the entry of a number of Chinese competitors with cheaper devices and similar designs.

Since its release in April 2013, Samsung reportedly has shipped 63.5 million units of the Galaxy S4, while the Galaxy S3 shipped about 65.6 million units.

“I don’t think the new S5 smartphone itself will be a major game changer,” Oh Sang Woo, a Seoul-based analyst at Leading Investment & Securities Co., told Bloomberg. “Still, it is expected to sell about 50 to 60 million units a year so it will contribute big to Samsung’s earnings.”

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