Weekend Ahead of Fold and Flip 5 Launch... Galaxy Becomes a 'Chabi Phone'

Illegal Subsidy Distribution Ahead of Unpack for S23 and Z4

Ahead of Samsung Electronics' Galaxy Z Fold and Flip 5 unpacking event on the 26th, illegal subsidies are being distributed for the previously released Galaxy S23 series and Z Fold and Flip 4. At "Seongji" stores (distribution points that offer high illegal subsidies through online promotion and in-store visits), devices priced over 1 million KRW have become so-called "travel expense phones" or "minus phones," where buyers receive extra money under the pretext of travel expenses.

On the 16th, illegal subsidies exceeding 800,000 KRW were distributed mainly at Seongji stores for the S23 series and Z Fold and Flip 4.

[Image source=Yonhap News]

Although it varies by store and carrier, in the case of the Z Flip 4, if you sign up with a number transfer (changing carriers) and use a monthly plan in the 100,000 KRW range, you can receive up to 160,000 KRW as "travel expenses." Other stores confirmed paying buyers 130,000 KRW. For the relatively lower-priced S23 base model, travel expenses of over 200,000 KRW are sometimes paid under the number transfer condition. To receive travel expenses at Seongji stores, you must use a high-priced plan and subscribe to additional services. However, the price difference is significant compared to receiving only the legal subsidies stipulated by the Act on the Improvement of the Distribution Structure of Mobile Communication Terminals (the "DanTong Act").

Currently, when using a 100,000 KRW range plan, the official subsidy for the carrier's Z Flip 4 is 600,000 KRW. With an additional 15% store subsidy, you can get a 690,000 KRW discount. The Z Flip 4's retail price is 1,353,000 KRW, so if you only receive the legal subsidies under the DanTong Act, you can purchase it for 663,000 KRW. However, considering the travel expenses, about 820,000 KRW is illegally subsidized to the consumer. Using the same plan, the S23 base model has a retail price of 1,155,000 KRW and an official subsidy of 500,000 KRW. With the additional store subsidy, the discount is 575,000 KRW, and the price complying with the DanTong Act is 580,000 KRW. But when including travel expenses, an illegal subsidy of 820,000 KRW is provided, similar to the Z Flip 4.

Illegal subsidies come from sales incentives paid by carriers and manufacturers to distributors to promote device and service sales. With the launch of the Z Fold and Flip 5 imminent, sales incentives have been increased to promote the sale of old device inventory, and part of this is being passed on to consumers. In fact, one Seongji store stated, "Since the Z Flip 5 is coming soon, this opportunity might be the last."

Last month, the Korea Communications Commission issued an unusual written warning to KT and LG Uplus for illegal subsidy payments. Before the written warning, a verbal warning was given, but as illegal subsidies continued, the written warning was issued for the first time in two years. However, the Galaxy unpack event is just around the corner. From the perspective of manufacturers, carriers, and distributors, they need to dispose of old products. Also, recently, more people have become skeptical about whether controlling device prices through the DanTong Act is desirable, making price control difficult.