A Post-Note Samsung

It looks like the hammer has finally dropped and Samsung has instructed its partners to stop selling all Note7 phones and instructing users to stop using both the original devices and the supposedly safe replacements. I’ve spent a fair bit of time over the last few weeks talking to reporters about all of this and again this week as the latest installment in the saga has unfolded, so I thought I’d share with Insiders some of my thoughts about what happens next.

A quick note: this article was written on Monday, before Samsung announced that it was permanently ending production of the Note7.

The difference between a one-off and a pattern

Though in some ways the issue that appears to be plaguing the replacement Note7 devices is the same as the original one, the situation has now changed dramatically. In the beginning, Samsung could claim this was a one-off, put it down to one of its partners, and entirely resolve it with speedy intervention and a plan to replace all the potentially faulty devices with replacements. But now, several things about this scenario have changed:

  • Samsung’s claim to have found the source of the problem seems to be wrong
  • Samsung’s proposed solution (swapping battery suppliers) doesn’t seem to have worked
  • The simple safety features on both the packaging and the device which were intended to flag safe devices are now useless (and downright misleading)

As a result of all of this, owners and potential buyers of these devices will now find themselves questioning whether Samsung really knows what caused the fires in the first place and, therefore, whether any future proposed solution can actually solve the problem definitively. In other words, we’ve gone from a one-off – an outlier – to a pattern and that’s about the worst thing that could have happened from a Samsung brand perspective.

I’ve written previously about the dangerous power of negative narratives in tech. What’s happening here is we’re seeing a narrative developing around Samsung’s devices, especially once you add in recent reports about exploding Samsung washing machines as well.

Where we go from here

The question now becomes where Samsung goes from here. The taint of the faulty devices isn’t going to vanish immediately and the second round of problems means, not only is this going to be in the news for even longer, but the perceptions will linger beyond that. At the very least, Samsung needs to kill off the Note7 at this point but, even worse, it may have to kill the Note line entirely (at least by that name) in order to shake off the negative associations. The best case scenario is Samsung is able to continue the line under another name come next Fall. The worst case is it has to abandon this whole line of devices entirely.

However, the impact won’t be limited to just the Note line. The narrative discussed above could spill over into how people view future devices, which could be even worse. Given Samsung’s usual launch dates for new devices, it is going to have to do a lot of work between now and the Spring to ensure the next Galaxy S phones aren’t hampered by lingering concerns about quality and safety. If it fails to do that, we could see some long-lasting effects that could put Samsung back into the sort of tailspin they found themselves in a few years ago. As I’ve said previously, that would be a great shame, because Samsung had appeared to be finally recovering from all that.

Competitive benefit

The other big thing I’ve been asked about is to what extent competitors will benefit. Samsung issued a number suggesting a large portion of original buyers had replaced their faulty Note7 phones with replacement ones, once those phones became available. But between the early window when those replacements weren’t yet available and the fact almost all the devices sold in the US and other markets will now have to be replaced with other phones, those numbers are now meaningless. The big question is what phone people buy instead. There are four possibilities:

  • Buyers simply get refunds and wait until later to upgrade, perhaps holding out for a similar future device from Samsung
  • Buyers choose another Samsung device – on a net basis, the best outcome Samsung can hope for and probably quite likely for a lot of buyers who have an affinity for Samsung devices
  • Buyers choose another Android device – if they’re keen on Android but now wary of Samsung
  • Buyers switch sides and choose an iPhone (or go back to one if this was to be their first Samsung phone)

Only the last two options are really bad for Samsung in the long term and they’re probably the least likely. I would guess many buyers will either hold off on upgrading (assuming they still have their old phone) or switch to another Samsung. But, given the timing of all this relative to the launch of the Note7, the coming availability of the LG V20, and the launch of the Pixel from Google, there may be a decent number of buyers who switch to one of those, too. In many cases, Samsung may struggle to ever win those customers back – this has been something of a nightmare scenario for the small number of people who have bought one of these devices and potentially been through not one but two device replacements.

Overall, it’s very clear this has gone very badly for Samsung and it’s only a question of how long and how far the ripple effects will be felt. At the very least, Samsung is going to have a bad end to 2016 and it’s quite possible that its 2017 could be significantly impacted as well.

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Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

4 thoughts on “A Post-Note Samsung”

  1. I wonder if Apple’s considering something like this:

    “Welcome to iPhone BOGO $100”:

    “Show us your Samsung Note 7 receipt (with your ID and CC charge info) and we’ll credit you $100 to be used on any iPhone or iPad Pro purchase you make.”

    1. Can’t see Apple doing this – they’ve never taken Samsung on directly and tend to focus all their efforts on OS vendors (Microsoft and Google) rather than OEMs. I’d see this as stooping to Samsung’s level (as I suspect would Apple), and I just don’t see it happening.

  2. If this fiasco ends up negatively impacting Samsung not only for 2016 but 2017 as well, this would be an opportune time for MS to fill the void with a premium Windows Mobile phone and take advantage of Samsung’s tarnished brand reputation.

    “Never let a good crisis go to waste” – Rahm Emanuel

    1. It’s a nice idea, but Microsoft isn’t ready to sell a phone as you described (just pushed its efforts off into late 2017 or possibly even 2018), so there’s no way they could spin up a response quickly enough.

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