When Samsung released the Galaxy Note 7 smartphone two weeks ago, it appeared to have a critical and commercial hit, selling an estimated 2.5 million units.
Then the big, fiery letdown. The South Korean electronics giant suspended sales and announced a recall, after discovering batteries of some phones exploded while they were charging.
The major recall of a well-received product in a fiercely competitive market is a blow to any manufacturer. But it is particularly stinging for Samsung, which is in a pitched battle with LG and Apple, both of which are expected to announce new smartphones next week.
Samsung has capitalized on a recent decline in interest in Apple’s iPhone, last quarter posting its strongest profits in two years on sales of the Galaxy S7 and S7 Edge. Rivals are circling. In addition to Apple and LG, the company faces increased international competition from Android rivals HTC, Lenovo and Huawei.
In a cooling smartphone market worldwide, the Note 7 situation could make an Android user consider an iOS device, but more likely could “make me want to go to another Android maker like LG,” says Tuong Nguyen, principal analyst with research firm Gartner.
“It’s a pretty tough time in the industry because all the vendors are struggling with keeping consumers regularly updating their devices and anything that puts a hiccup in that is noteworthy,” Nguyen says.
While Samsung increased its global sales of smartphones by about 6% in the second quarter of 2016, overall sales of mobile phones worldwide contracted by 0.5%, according to Gartner.
Samsung is the global leader in smartphone sales, selling 76.7 million in Q2 2016; Apple is No. 2 with 44.4 million sold.
For Samsung, the timing couldn’t be worse, say analysts.
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SOURCE: USA Today, Jon Swartz and Mike Snider