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Samsung Note: A Redefining Sector Opportunity?

by Richard Guppy | Oct 11, 2016

It is tempting to keep checking on how Samsung is handling the Note 7 crisis and what the latest developments are.  But the more interesting questions lie not with the 'car crash' itself, but with what the other drivers are doing: how will Samsung’s competitors take advantage of Samsung’s difficulties? (just to recap: the Note 7 is being recalled and distribution/production halted due to overheating issues).

So, which competitors will take advantage of Samsung’s troubles?  The short answer is ‘all of them’, as the Note 7 issues affect not only the Note 7 but the entire Samsung mobile portfolio, as customers worry about quality and safety issues.  But beyond that, and in strategic terms rather than purely short-term gain:

  • Apple will benefit from the temporary removal of its primary competitor in premium phablets.
  • LG, HTC, Sony could benefit as they have the channel relations in place already to step in and replace Samsung products with their own high-tier equivalents.
  • Chinese giants – Huawei, Lenovo – can use the opportunity to grow their channels as distributors/operators seek alternatives to Samsung.  Huawei and Lenovo today have weak channels into many developed smartphone markets.
  • Chinese newcomers – OnePlus, Xiaomi, OPPO, Vivo – have sufficiently high-tier products to interest channel partners and to develop new markets as alternatives to Samsung.  Today they are largely absent in many developed smartphone markets.
  • Google: its new Pixel XL will benefit from the absence of the Note, and during the critical holiday period.

In short, don’t pay attention only to the headlines around Samsung.  Look also at what is happening elsewhere on the track.  This could be the moment that new brands enter developed markets, creating new and long-term competition for Samsung, in addition to the large costs, lost revenues and brand damage that Samsung will suffer.  Xiaomi and Huawei are both intent on growth in the US market, for example; OnePlus could choose the moment to ramp up its volumes from single millions to tens of millions.  Pixel is a major new brand launch.  Interesting times.

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