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Samsung Note7 recall could hurt brand, or not

Matt Hamblen | Sept. 19, 2016
U.S. consumer product safety agency is working with Samsung over formal recall

Jack Narcotta, an analyst at Technology Business Research, said Samsung is "addressing the problem with speed, [which] speaks to the magnitude of the problem within Samsung and how important it knows this situation is to its brand."

Difficulties with replacement devices and attaining an official recall with the CPSC "has piled on some additional pain for Samsung," Narcotta added. "Samsung's mobile business was on the rebound, and this Note7 problem will surely squelch some of the momentum."

Narcotta said the recall and the subsequent fallout is unlikely to influence Samsung's current or upcoming market share, which puts it at No. 1 globally in shipments and No. 2 behind Apple in the U.S. The Note7 accounts for only 10% of Samsung's total smartphones shipped, behind the Galaxy S7 or Galaxy S6. "However, I think the ripple effect on future purchases will be significant and visible in shipment totals in fourth quarter 2016 and first quarter 2017," he added.

Narcotta said the negative press from battery fires appears to be specific to only the Note7. "But as bad news travels fast, and gets distorted along the way, I'd expect the Galaxy S smartphones to be affected as well."

Overall, Narcotta added, "Samsung is not in a great situation. Huawei is charging hard. China is a huge battleground in all price bands, not just premium bands that Samsung covets. India is rife with strong, fast competitors."

One analyst was especially hard on Samsung over the way it has handled the Note7 battery fires and recall.

"Samsung's battery-gate is one of the biggest problems the company has ever faced," said Jeff Kagan, an independent analyst. "I think it is very significant and potentially devastating to their smartphone business. ... Things will get worse if users start to get injured."

Kagan questioned how Samsung didn't know the problem existed before the phone was released. "What about testing? Apparently Samsung did not test well enough before the release. Samsung shot themselves in the foot. There will be real damage to the Samsung brand."

 

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