Seoul Restores Smartphone Subsidies Because Premium Handsets Are Apparently Essential

South Korea on Monday decided to abolish its ban on smartphone subsidies – in part to make premium devices more affordable.

The Mobile Device Distribution Improvement Act was introduced in 2014 to level the playing field among mobile carriers by preventing deep discounting of handsets to lure customers. In theory, the rule meant incumbent carriers could not use their deep pockets to combat smaller rivals. It also helped local champions Samsung and LG (which at the time made smartphones) by easing pressure on their margins.

Critics now argue the law harms competition and keeps handset prices high.

"As the smartphone market has recently launched with a focus on premium models and smartphone prices are continuously rising, it is time to make efforts to lower the burden of people's device purchase costs," explained a Monday notice from the Office for Government Policy Coordination.

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Like many nations, South Korea has recently experienced higher-than-usual inflation – although it's done better at controlling it than other nations and settled at an annual rate of around three percent.

But the cost of smartphones – particularly home-grown Korean ones – has climbed as manufacturers pack in more features and emphasize premium models. Samsung last week made the high-end Galaxy S24 Ultra the hero of its annual smartphone launch event – a device that starts at $1,299. List prices for Samsung's folding phones are around $500 higher.

Samsung held 84 percent of the Korean smartphone market in Q3 of last year, according to Counterpoint Research.

The chaebol is also seen as intertwined with South Korea's economy – so much so that Samsung Electronics boss Lee Jae-yong was released early from prison to ensure his contribution to national prosperity would not be missed.

In comparison to pardoning bribery and corruption charges, removing a decade-old unpopular ban on subsidies seems like a no-brainer. ®