Samsung's ditching of
flagship phone portends Android turf war
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[October 12, 2016]
By Julia Love and Deborah M. Todd
(Reuters) -
Samsung
Electronics’s abandonment of the Galaxy Note 7 due to safety concerns
will likely touch off a turf war among Android smartphone makers,
analysts said, presenting them a rare opportunity to gain share but with
less room for arch rival Apple Inc.
Consumers tend to commit to their choice between Apple's iOS operating
system for smartphones and Google’s Android, leaving Samsung’s fellow
Android manufacturers such as LG Electronics and Alphabet Inc's Google
in prime position to strike. Both have newly released phones.
A hardware problem is unlikely to change a customer's preference for
software systems, said analyst Jan Dawson of Jackdaw Research.
"Samsung has the premium end of the smartphone market pretty much sewn
up on the Android side," he said. “This creates a slightly bigger
opening.”
Research firm TrendForce revised up Apple's 2016 smartphone shipment
forecasts by 3 million to 208 million, while slashing Samsung's
shipments estimates by 6 million. It also raised forecasts for China's
Huawei Technologies [HWT.UL], No.3 globally, by 4 million.
"A substantial portion of consumers’ demand will now go to the three
major Chinese brands – Huawei, Vivo and OPPO," it said in a note.
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Nevertheless, in San Francisco, prime Apple territory, some consumers
were switching to the home team, and Apple stock has risen on
expectations of a broader move.
"Some people might have already been thinking about making the switch
and now here's their chance," said Robin Williams, a sales associate at
a Sprint store on Van Ness St in San Francisco, describing some
customers moving to Apple.
Bob O’Donnell of TECHnalysis Research said Apple would benefit, "but I
don’t think they are going to get all of it because Apple has a single
product."
Samsung on Tuesday scrapped the $882 flagship smartphone, in what could
be one of the costliest product safety failures in tech history.
The news is a boon for Google, which last week announced a new line of
Pixel smartphones, plunging the company into the hardware market that it
has previously left to manufacturers such as Samsung. Samsung’s retreat
will prompt consumers to take a closer look at Google’s phones.
"Samsung’s meltdown is a big opportunity for Google to do far better
with Pixel than it has with its previous Nexus devices," said Richard
Windsor, analyst at Edison Investment Research.
Despite the reputational damage, Samsung will remain competitive for
premium smartphone sales, analysts said. LG’s V20 smartphone will not
arrive in the United States until the end of the month. Google’s Pixel
phones do not ship until Oct. 20, and will only be available in the
United States at Verizon.
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![](../images/101216pics/busine49.jpg)
Android mascots are lined up in the demonstration area at the Google
I/O Developers Conference in the Moscone Center in San Francisco,
California, in this May 10, 2011 file photo. REUTERS/Beck Diefenbach
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"Google needs to be present at retail and with operators in volume in time to
meet this demand... it needs to accelerate the launch as much as it can," said
Windsor.
ROOM TO SHINE
For consumers seeking immediate replacements for the Galaxy Note 7, it may be
easiest to go with another Samsung phone, said O’Donnell at TECHnalysis. “You
can’t write off Samsung,” he said.
Samsung is offering to exchange the Note 7s for its flagship Galaxy S7 models. A
permanent end to Note 7 sales could cost it up to $17 billion, according to
calculations based on analysts' projected shipments of the device.
And
Apple may have room to shine, especially before new Android phones arrive.
At a T-Mobile store in San Francisco, salesperson Omar Arreola said some Samsung
customers were so upset with the company that they switched to the iPhone 7.
"They trust the brand," he said.
Brian Green, whose Note 7 caught fire on a Southwest Airlines flight last week,
also said he replaced his device with an iPhone. He raced to purchase the Note 7
after its release, but he said he is unlikely to be an early adopter again.
“Next time I think I'll wait and get it once it's been around the block a few
times,” he said.
(Additional reporting by Rory Carroll and Malathi Nayak; Additional reporting by
Miyoung Kim in SINGAPORE; Editing by Lisa Shumaker, Sam Holmes and Muralikumar
Anantharaman)
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