Recall of new Note 7 clears the way for more sales of the upcoming iPhone
Samsung had hit on its hands with the new Galaxy Note 7 by designing it to appeal to fans of its prior oversized phones while also drawing in new customers. But with increasing reports of serious battery defects, Samsung had to recall the hot-selling device at perhaps the worst possible time.
The recall, which Samsung said on Friday could take several weeks, leaves a big opportunity for Apple’s new iPhones, expected to premiere on Wednesday, to reach the top of the sales charts. Instead of giving its iPhone killer a big head start, Samsung now faces the prospect that buyers will be heading back to their wireless carrier to exchange the device just as the new iPhones show up.
“The timing could not be worse given how positive the reviews of the Note 7 have been, and this is the device Samsung was counting on for the holiday season,” says Carolina Milanesi, analyst at Creative Strategies.
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And although iPhone sales have sunk this year, a significant block of current iPhone owners could be looking to upgrade to the new models, widely referred to as the iPhone 7. Samsung itself waited two years to upgrade the Note, also creating a large group of possible buyers who want to upgrade and who may now be wooed away by Apple, noted Neil Shah, research director at Counterpoint Technology.
“This squashes Samsung’s only critical window of opportunity before the new iPhone proliferates to tap the two-year old Note and iPhone base,” Shah says.
Wall Street analysts who follow Apple jumped on the news to predict that the recall would boost iPhone sales.
“This issue could bode well for Apple and specifically the iPhone 7 Plus with dual camera that is expected to be unveiled next week,” Brian White, an analyst at Drexel Hamilton, said. “Furthermore, we believe the images and videos of burning Galaxy Note 7 devices in the media will cause some damage to the Samsung brand, further bolstering Apple’s brand.”
Still, analysts give Samsung credit for moving quickly to acknowledge and address the battery problem. The South Korean electronics giant said it had already shipped 2.5 million of the Note 7 since it hit the market on August 19 and had that only 35 battery problems have been reported.
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“It’s great that they’re acting quickly and decisively here, rather than being defensive or stalling,” said Jan Dawson, chief analyst at Jackdaw Research. “The fact that they’ve been able to replicate the issue in their testing means it’s real and absolutely needs to be dealt with, so kudos to Samsung for just getting on with things.”
But Dawson also criticized Samsung for allowing the flaw to slip through pre-release testing. And Apple could be a beneficiary, he agreed.
“To top it all off, the timing of the Note 7 launch was supposed to steal some thunder from the new iPhones, but now the Note 7 won’t even be on sale the week those iPhones are announced,” he added.