Samsung’s hopes go up in flames

Samsung is the world’s biggest seller of mobile-phone handsets, boasting a market share of over 22% in the second quarter of 2016, according to research firm Gartner – more than twice Apple’s market share. It has carved out a position as a high-quality brand whose products sell for a premium price. Now that brand is under threat.

Its top-end phone, the Galaxy Note 7, which retails in the UK at over £700, developed a worrying tendency to burst into flames. The firm recalled 2.5 million handsets in September, but phones shipped to replace the faulty units also burst into flames. So on Tuesday, Samsung took the drastic step of halting production and taking the device off the market.

The saga has been a disaster for Samsung – $21bn was wiped off its share price earlier this week, and the company says pulling the Note 7 could hit profits by $2.3bn. Its ambitions to rival Apple in the smartphone market “suffered a deep blow”, says Jung-a Song in the Financial Times. And the fact that the firm replaced defective handsets with ones that were still unsafe “could trigger a large loss of faith in Samsung products”, says Richard Windsor from Edison Investment Research, quoted on BBC.co.uk.

“Expect others to capitalise on the opportunity,” says Dan Gallagher in The Wall Street Journal. Chinese firms such as Huawei were already set to take Samsung on. Another winner could be Google, which has just launched its own top-end handset, the Pixel. “Google’s record in hardware has never been stellar,” but this time it may have
got lucky.