"Card Discounts, Points All-In" Smartphone Self-Sufficiency Rises... 1 in 10 Users

[Asia Economy Reporter Seulgina Jo] "No matter how I calculate, buying a phone through the self-supply system and receiving the carrier selection discount is the most economical." Ms. Kim Nami, a worker in her 30s, recently switched her smartphone to the Galaxy Note20 and used all available card discounts and membership points on an online mall. Afterwards, she completed the activation process with the carrier and received a 25% selection discount.

One out of ten domestic smartphone users has been confirmed to purchase devices directly through online channels and activate them via the self-supply system. As consumers disappointed with the "stingy" official subsidies flock to the self-supply system that bypasses carriers, the increase over the past year and a half has reached 40%.

According to Cho Seung-rae, a member of the National Assembly's Science, Technology, Information and Broadcasting Communications Committee from the Democratic Party of Korea, the number of self-supply devices, estimated at about 3.833 million units in December 2018, increased to about 5.349 million units last July. During the same period, the proportion of self-supply devices among all mobile communication subscribers rose from 6.89% to 9.54%. This is the first time that the number of self-supply device users has been estimated based on data from the Ministry of Science and ICT, rather than market research firms.

This is largely attributed to the increase in non-face-to-face demand due to the COVID-19 pandemic and the fact that carrier official subsidies have been about half of previous years. An industry insider said, "Those who carefully compare prices and seek various discounts such as cards increasingly prefer the self-supply system," reflecting the current atmosphere. The introduction of the Device Distribution Structure Improvement Act (DanTongBeop), which allows users to receive a 25% discount on communication fees instead of carrier subsidies, has also influenced this trend.

The popularity of the self-supply system has become more prominent in the market this year. In August, Samsung Electronics' second half strategic smartphone, the 'Galaxy Note20,' recorded an almost sold-out streak on self-supply channels such as the official online mall, Coupang, and Gmarket as soon as pre-orders began. At that time, major sites like Phone Ppomppu and Clien posted messages such as "Coupang's self-supply pre-order sale is cheap. 13% immediate discount and 24 months interest-free," and "Self-supply is much more economical."

The government is also supporting the activation of the self-supply system. The number of self-supply device models, which was only three in 2017, expanded to 26 models in 2019. Sales of self-supply devices through major channels such as E-Mart and Coupang have also been steadily increasing. In particular, the number of self-supply devices sold on Coupang exploded from about 5,000 units in 2018 to about 80,000 units in 2019, a 1600% increase.

Demand for self-supply phones in the domestic mobile phone distribution network is expected to grow further in the future. The prolonged COVID-19 pandemic and the normalization of the non-face-to-face (untact) era are also cited as factors expanding the self-supply system. Market research firm Strategy Analytics (SA) predicted that the purchase share of self-supply phones will reach 11.8% this year.

However, considering that the self-supply system was first implemented in 2012, there are criticisms that policy efforts have not been sufficient so far.

Assemblyman Cho said, "While the global share of self-supply devices is expected to reach 70%, in Korea, the self-supply system was implemented in 2012, and only after eight years has the share of self-supply device users approached 10%," adding, "Now that more consumers are pursuing rational consumption, the Ministry of Science and ICT should take a more active role in improving and expanding self-supply device policies."