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After new reports of battery fires and explosions began surfacing in replacement Samsung Galaxy Note7 smartphones around the world in recent weeks following global recall efforts for the original phone, it was only a matter of time before the Note7 flagship phone would be unceremoniously dropped from the company’s product line.
That’s the consensus opinion from a group of mobile IT analysts who spoke with eWEEK on Oct. 11 about Samsung’s not-so-surprising, but still-startling move to drop the innovative phone from its product lineup for good and offer customers other Samsung phones or full refunds to put the whole mess behind the company.
Samsung announced the end of its Note7 flagship smartphone model following more than 100 reports of battery fires and explosions around the world, including about five recent reports involving replacement Note7s that were supposedly free of the defects in the original models.
The quick demise of the handset, which was first sold in late August and subject to a recall in September, had to be done after the alleged fix ended up being no better than the original battery problem, Rob Enderle, principal analyst with Enderle Group, told eWEEK.
“They had no choice,” said Enderle. “They were on a path where folks would start avoiding all Samsung products so they needed to do dramatic damage control [and] the product had to be discontinued. It may be the end of the Galaxy Note line altogether.”
If the Note7 hadn’t been dropped permanently and pulled off the market, there would have been “no way a consumer, or airline, would be able to tell which Galaxy Note was safe” for use, he added.
In addition, if Samsung had kept the Note7 on the market despite concerns about its batteries, “there was a good chance all Samsung phones would be banned [on planes as the Note7 had in recent weeks] and an increasing chance airlines might act more aggressively against all smartphones,” said Enderle. “Samsung clearly didn’t understand the cause of the problem when they started implementing fixes and, in the end, they did billions of dollars of avoidable damage to their brand.”
Maribel Lopez, principal analyst at Lopez Research, told eWEEK that the end of the Note7 model makes sense because it was ultimately becoming “too difficult to get all the phones back and replaced.”
That’s too bad, she said, because “it was a great phone,” she added.
The move was absolutely understandable because while the first attempt to recall and fix the phone was not a desired situation, it ultimately failed, leaving Samsung with no alternative, said Lopez. “Absolutely, no one gets a third chance at a phone,” she added.
Another analyst, Tuong Nguyen of Gartner, said he thinks Samsung “could have tried another round [of replacement phones], but that would likely have caused even more confusion and frustration. Note7 owners would be left wondering if they can rely on the replacement of the replacement.”
For Samsung, the troubled release of the Note7 is a “big and damaging one for a number of reasons,” including that the handset is the company’s flagship model and affects a valuable high-end segment of the market. Worse for Samsung is that the problems came “close to the end of the year—the biggest quarter for sales.”
The Note7 Debacle Could Hurt Samsung’s Relationship with Consumers
Jack Narcotta, a senior analyst with Technology Business Research, called the Note7 fiasco a “worst-case scenario for Samsung” that damages the company financially through lost sales of a premier device and unexpected costs for the recall, while also putting “a tremendous dent in its brand, which was on the rebound after the somewhat flat response to the Galaxy S5 and S6.”
Samsung’s Note7 Debacle Is Bad, but Survivable: Analysts
For Samsung, the end of the Note7 likely came because while its problems on paper appeared resolvable, ultimately no solution was readily available, he said. “At its most basic level it was a hardware component problem, and as we know Samsung is, in addition to being a mobile device company, a hardware component manufacturer. The earlier missteps or corners that Samsung perhaps cut were a bit out of character for this type of recall, but it appeared that Samsung was making the right moves.”
The biggest potential problem for Samsung now is how consumers will see the brand in the aftermath of the Note7’s death, said Narcotta, while enterprise users are less likely to worry about the situation long term.
“Consumers, however, will hit the brakes,” said Narcotta. “If you listen, you’re likely already hearing what Samsung is fearing most: the consumers are saying ‘Samsung’s phones explode.’ Remember that the device in question isn’t the Galaxy S7. It’s the Note7. But consumers are already talking about it as a problem across all of Samsung’s devices. That’s potentially catastrophic for Samsung.”
Another analyst, Avi Greengart of Current Analysis, said he was pleased that Samsung made the call to drop the Note7 when it did.
“It’s a relief that the product is being pulled before it became a real tragedy with someone’s death,” said Greengart. “It is also good that Samsung is ending this recall madness and stopping further erosion of its brand.”
The end of the phone became likely, said Greengart, when major mobile carriers including AT&T, T-Mobile and Verizon announced recently that they were stopping sales and distribution of the handsets due to concerns about fires. “Once Samsung’s carrier partners took matters into their own hands and stopped distributing supposedly fixed Note 7’s there was nothing Samsung could do,” he said.
Apple Could Benefit from the Note7’s Demise
The Samsung competitor that could most benefit due to the collapse of the Note7 is Apple, said Greengart. “Apple is going to be a big beneficiary just because Apple and Samsung are the main players in the premium segment of the market. I expect only a minority of Note 7 users to move to iOS, but the Apple ecosystem is incredibly sticky, so those who do leave likely are not coming back.”
At the same time, the failure of the Note7 in the marketplace could also benefit Google’s latest Pixel and Pixel XL premium smartphones, while also boosting sales for LG, HTC, and Lenovo, said Greengart.
Overall, the problem with the fire-prone Note7 was likely “a fundamental design flaw, not a problem with the battery supplier,” said Greengart. “Or that Samsung botched the recall and didn’t actually fix some of the replacement units. We still don’t know what the problem is, which means that Samsung doesn’t know either, or isn’t saying.”
Whatever did happen, though, Samsung’s “communication has been terribly opaque,” he complained.
Another analyst, David McQueen of ABI Research, told eWEEK that the plug had to be pulled on the phone model at this time because there was no way for the company to know how many more phones would catch fire and fail if it remained on the market.
“The rug got pulled out from under them with the problems of the Note7,” said McQueen. “It’s very unfortunate for them” because it was a unique phone due to its stylus, its 2K display, retina scanning capabilities and other innovative features, he said. “It had a whole host of things which were probably going to be leaders in the marketplace. None of them appear on the iPhone7.”
Roger Kay, an analyst with Endpoint Technologies Associates, called the Note7 situation “a pretty big debacle” for the company.
“The fact that they withdrew it entirely is kind of the company owning up that it was designed badly,” said Kay. “It exceeded its heat envelope. They tried to have a certain form factor of smallness and performance, and they tried to fuel all that with a battery with long-enough life.”
Ultimately, that strategy failed big time when Samsung engineers tried to squeeze its battery into too small of a space, which led to heating and fire problems, said Kay. “It couldn’t be done without a complete redesigning of the phone. They essentially pushed the technology a little too far.”
What Samsung should have done, he said, is tested the new phone more tenaciously so the problem would have surfaced long before any of the devices were ever sent to manufacturing or sold, said Kay.
“They should have caught this in tests,” he said. “I wouldn’t be surprised if someone in engineering saw it and raised a finger but superiors might have said ‘we don’t want to hear about it,'” said Kay. “That’s a pretty likely scenario, but it’s just speculation.”
Samsung’s Note7 Debacle Is Bad, but Survivable: Analysts
Ultimately, Samsung will survive the Note7 embarrassment in the marketplace and recover from the ordeal, said Kay. “It’s a black eye from a PR point of view, but I think financially they’ll probably be OK. It will have a financial impact, but it won’t sink the ship. When the Samsung Galaxy 8 comes out [in early 2017], they’ll be back in the game.”
Note7 customers who have original or replacement Note7 handsets are being told by the company and by the U.S. Consumer Product Safety Commission (CPSC) to power down their smartphones immediately and exchange them for another Samsung smartphone, including a Galaxy S7 or Galaxy S7 Edge, or seek a full refund where they bought their devices. Consumers who have questions about what to do with their phones can go to the company’s Website at samsung.com/us/note7recall, or call the company at 1-844-365-6197.
The Note7 debuted in late August and quickly was the source of reports about battery fires and explosions. Samsung addressed those initial reports by investigating the devices that had fires and starting its own global recall, and then in September cooperated with U.S. regulators at the CPSC when the agency issued a government recall of a million of the handsets due to at least 100 reports of fires and explosions from consumers.
But in late September, after new post-recall phones began being distributed, new reports of battery fires began arriving. The first came in from a consumer in China who said that his brand-new, post-recall Note7 smoked and caught fire, while earlier in October another replacement Note7 reportedly began smoking in a Southwest Airlines jet in Texas as the aircraft prepared to depart.
Instead of showing off its flagship Note7 phone to a waiting marketplace, Samsung had to concentrate on fixing a worrisome fire problem and hoped that its consumers didn’t start heading for the exits.
The CPSC, which ordered the Samsung recall in September, quickly launched an investigation into the Note7 fire incident on the jet.
The Note7 had some similarities to Samsung’s S7 and S7 Edge smartphones, which were released in March, as well as some new features. The Note7 was a 4G LTE phone with all-new iris-scanning capabilities for security, an integrated S Pen stylus, a first-ever “Secure Folder” feature and other updates aimed at making users productive and creative. It was slimmer and more rounded compared with the previous version, the Note 5, which debuted in August 2015.
Highlighting the Note7 was a 5.7-inch quad HD dual-edge Super AMOLED display, a Qualcomm Snapdragon 820 octa-core 64-bit processor, 4GB of LPDDR4 memory, 64GB of on-board storage, a 3,500mAh battery with quick charging, a microSD slot for additional storage and the Android 6.0.1 Marshmallow operating system.