Reports suggest that Samsung Electronics is planning to launch a program to sell refurbished used versions of its premium smartphones starting next year. As growth in the global smartphone market slows, Samsung is looking at innovative ways to improve its mobile phone revenue and profitability, in our view. According to Deloitte, used smartphones will be a $17 billion market in 2016 and at least 10% of premium smartphones purchased in 2016 will have two or three owners before being retired. We believe by entering this market Samsung can attract consumers towards its refurbished models and lure them away from phones of local players such as Micromax in India and Xiaomi in China, which sell smartphones with high end features at low prices. If the company is able to avoid the risk of cannibalizing sales of its own low priced models, this strategy can build momentum for its mobile phone segment, which according to our estimates accounts for more than 30% of its valuation.

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