How the Decision To Cease Note 7 Production Could Influence Samsung’s Market Dominance

The past month and a half has not been particularly kind to Samsung. With the company having to recall an estimated 2.5 million Note 7 phones and recently suspending the device’s production due to reports of even the replacement units inexplicably catching fire, Samsung is not in the greatest of positions. While the halt in production might be temporary, the consequences could potentially harm the company’s financial prospects well into the future.

Despite this, Samsung attempted to quell the unrest among its stakeholders by announcing last Friday that it still anticipates a $7 billion profit for 2016. This projected figure brought some relief, but a question that lingers is: could Samsung’s dominance in the smartphone market be undercut going into 2017?

Answering this question, of course, depends on the longevity of the current crisis and how Samsung addresses the issue. Negative news about a product in a high-spending market such as the United States can resonate with other markets across the globe. For instance, large telecom companies in the US and Australia have already stopped offering the phone for now. It’s conceivable that the regulation-heavy European Union (EU) might adopt a similar stance. Seeing this as a window of opportunity, China — known for its bias towards local industry — might leverage the situation to boost local companies like Huawei and Xiaomi.

Increasing competition from these companies is another aspect to consider. According to the last International Data Corporation (IDC) report, which examined global smartphone shipments for the second quarter of 2016, Huawei has seen its market share grow by 8.4% year-over-year. While Samsung led the race with 77 million phones sold up to July this year, giving it a 22.4% market share along with a 5.5% growth year-over-year, it’s important to note that Samsung’s lead was primarily driven by the volume of devices it shipped during the same period, particularly thanks to the Galaxy S7 and Galaxy S7 Edge models.

However, the current crisis, coupled with the enthusiastic reception of the iPhone 7 and iOS 10, may potentially enable Apple to claw back some of its dominance and fill the vacuum that the Note 7 is likely to create. But it’s not just Apple. Google has also entered the fray, launching its “made by Google” Pixel Phone, which boasts superior camera quality and direct updates from Google amongst other features, thereby further intensifying the competition for Samsung.

While it may take some time for Samsung to cede its leading position, there’s an expectation that its market share will continue to diminish into 2017 and beyond if the current situation persists. Overall, it’s important to consider that the smartphone market is experiencing a slowdown in global shipments, with consumers choosing to hold onto their current devices for longer largely due to economic factors and a myriad of options available to them.