Analysts: Samsung Galaxy S7 may be down, but it is not out yet

Transparent and swift action during these testing times will enable the South Korean giant make a quick turnaround, industry analysts feel.

While the global recall of its flagship Galaxy Note 7 over battery explosion fears has jolted Samsung aficionados, including in India, transparent and swift action during these testing times will enable the South Korean giant make a quick turnaround, industry analysts feel. Before the Note 7 episode -- where 35 cases of faulty batteries were reported globally -- marred its reputation somewhat, Samsung has had a great run. According to market research firm Gartner, Android's market share for worldwide smartphone sales stood at 86.2 percent in the second quarter of 2016. Buoyed by the strong sales growth of Galaxy S7 and S7 Edge devices, Samsung topped the chart with its 21.8 percent 2015 Q2 global market share (year-on-year) increasing to 22.3 percent in Q2 2016.

In India, Samsung continued to lead the smartphone market with a 25.1 per cent share, another global research company, International Data Corporation (IDC), reported last month. According to media reports, Samsung will recall nearly 2.5 million Note 7s sold so far, amounting to a nearly $1 billion loss to the company, which has a market capitalisation of 260 trillion won ($235 billion). Note 7 devices were yet to be shipped to India, and so there will be no recall here, though there will be a slight delay in getting hold of one. Is the Note 7 episode a dampener for Samsung and a blessing in disguise for Apple that was losing ground to premium Samsung devices, including on its home turf?

"With Note 7 starting on a positive note, Samsung looked to carry forward the momentum. The recall couldn't have come at a worse time for Samsung, especially when Apple is about to launch its new flagship iPhone 7," Tarun Pathak, Senior Analyst, Mobile Devices and Ecosystems at New Delhi-based Counterpoint Research, told IANS. Samsung, however, immediately responded to the crisis. "Because our customers' safety is an absolute priority at Samsung, we have delayed sales of the Galaxy Note7 in India. We acknowledge the inconvenience this may cause in the market but this is to ensure that Samsung continues to deliver the highest-quality products to our customers," a Samsung India spokesperson said in a statement.

The company needs to act very quickly so that the sales numbers for the remaining quarters this year do not witness a dip. According to Anshul Gupta, research director at Gartner, Samsung also needs to ensure there are no further issues in upcoming devices and hence it needs tighter control over quality checks. "Samsung has identified the Note 7 batch which had the battery problem and they are replacing the devices quickly. So I don't see this is really something that will impact the company in the long term. It is not a design flaw or fault where it will take more time to make the device available in the market," Gupta told IANS. The best chance for Samsung to contain the damage is to be as transparent as it can be with consumers.

"It needs to inform users about the cause and solutions it adopted before the competition tries to drag the issue. Samsung has done well to be proactive at the early stages of product portfolio with whatever faulty samples it had at the time of recall," added Pathak. The recent announcement of refund, repair and replacement will also give users options to take a call on the situation at hand but, according to Pathak, eventually it is the transparency and swift action that will count. "Apart from this, we can also expect some offers with Note 7 when it comes out of the factory again to delight users," Pathak said.

Did Samsung overlook qualty checks in order to launch Note 7 in a year when Apple is set to launch iPhone7? "Generally, original design manufacturers (ODMs) have proper security checks at each manufacturing stage. But at a time when overall competitive pressure remains high as time-to-market is critical, very often lab times and testing periods are shrunk to expedite approval of key devices," Pathak said. Since we have seen quality devices from Samsung in almost all price segments, it is hard to believe that it missed on quality checks.

"Samsung is committed to producing the highest-quality products and we take every incident report from our valued customers very seriously. In response to recently reported cases of the new Galaxy Note 7, we conducted a thorough investigation and found a battery cell issue," the company statement further said. Whether this incident is going to help iPhone 7 or not remains to be seen as Samsung machinery is busy recalling and replacing the faulty Note 7 batch. "iPhones are already going through a flat sale and Apple iOS users have been expecting a new iPhone for a long time. I am sure iPhone 7 is more and more for existing iOS users and not for android customers," Gupta added.

So do not give up on Samsung yet, these analysts say. The global recall will only strengethen its image provided Note 7 devices get replaced nice and fast.


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