Samsung is on the ropes. It pains me to say it but the Note 7 fiasco is probably going to hurt them more deeply than they’ll admit and I suspect we’ll see two or three quarters of slow growth thanks to Explode-gate.
Consider the damage done to the brand. Pilots were telling users not to turn on their Note 7 phones as they taxied for takeoff. A total recall is now making everyone think their Samsung phones can explode at any time. The damage these exploding batteries did is complete. I’ve never seen so many burnt phones in one news cycle and, as evidenced by the plethora of Note 7 posts that followed the phone from fan darling to Public Enemy Number One, Samsung’s sales this quarter are going to take a hit.
The bottom line? Samsung lost a lot of money and a lot of brand loyalty. As Natasha Lomas writes, “analysts [are] estimating that a permanent end to Note 7 sales could cost the company up to $17 billion.” They’re even thinking of retiring the arguably clever Note name. This mess could mean the end of the dual Samsung/Apple rivalry, opening the market to new devices like the Google Pixel.
To be clear, it will be hard to knock Samsung off its perch. According to Statista Samsung sold 77 million phones in Q2 2016. This is a strong showing but down from their peak in Q1 2014 of 88 million. In Q1 2016 they owned 27.8% market share compared to Apple’s 14.4%.
The problem is that Samsung left the door open to other Android competitors. While there are few that can match its manufacturing and marketing might I assure you that none of them will ignore this opportunity to try to push cheaper and ostensibly better phones to Samsung consumers. Manufacturers like OnePlus and Xiaomi can easily step in and take over chunks of the market until Samsung is as popular or, more correctly, as unpopular, as Motorola or HTC.
The exploding Notes were a fluke. All told there was the potential for about 1,000 fiery phones out of the millions Samsung sold. But even one fiery phone on a bed stand or Jeep or plane is enough to scare consumers. Look what faulty batteries did to the hoverboard craze.
Samsung’s competitors are scrambling. Apple has just refreshed its iPhone line and we can expect an event later this month. In short, the deck is stacked against Seoul and it now has lots of explaining to do. Imagine the marketing problem: rather than crowing about being the best phone in the business now Samsung has to convince the world that their next phone (and their next and their next) won’t explode in your hand.