This is probably the worst possible thing that could happen to Samsung at such a critical time. Samsung's latest offering - Galaxy Note 7smartphones - are actually exploding due to a fault in the battery. There have been numerous reports where users of the smartphone have complained that the device caught fire while charging.
After a series of inquiries and inspections held by Samsung, the company made an official announcement for the global recall of the Galaxy Note 7.
Samsung launched the latest version of the Note series just two weeks ago. Citing an unnamed company official, Yonhap said Samsung's investigation found that faulty batteries led to the phone catching fire. The number of the Galaxy Note 7 phones with a faulty battery accounts for "less than 0.1%" of the products in the market and Samsung is discussing how to resolve the issue with Verizon and its other partners, the official told Yonhap.
The Yonhap report also added that "the battery issue is a fresh blow to Samsung's smartphone business that has been on a recovery track. Samsung reported stellar earnings that beat market expectations in the latest quarter and its stock price was at a record high before the Note 7's battery problems dented investor sentiment."
Why it is a boon for Apple
Tech giant Apple is set to launch the much-awaited iPhone 7 in the coming week. And for tech giant Samsung, this fiasco could well prove to be a very costly loss.
But for Apple, this is the best possible news at a most opportune time. Reason - Apple is set to launch the iPhone 7 next week and news of Samsung Galaxy Note 7's failure could not make it happier.
Although there's currently no official word on the number of units that are affected by the problem, a Samsung official who wished to remain anonymous has said the figure stands at less than 0.1% of the entire volume sold. "The problem can be simply resolved by changing the battery, but we'll come up with convincing measures for our consumers," he said.
A Reuters report said the delay in Galaxy Note 7 shipments due to explosion in batteries has "knocked $7 billion off" Samsung's market value.
Apple would now want to cash in on Samsung's disaster, hoping it would lead to greater sales figure for the upcoming iPhone. Also, Apple's last release - iPhoneSE failed to capture the market and was called a pointless launch by many tech critics.
In July, Apple reported its Q3 earnings and the company sold 40.4 million iPhones in the recent quarter, compared to 47.5 million the same time in the last quarter. That's a 15% drop, and it is a clear sign that the Apple iPhone momentum has significantly dropped. The drop in sales means Apple's profit has dropped 27% as a result.
A slowdown in iPhone sales this year was inevitable. Market research firm Gartner predicted that smartphone sales would slow this year worldwide, and the certain announcement of a new iPhone in September has only helped sales slow even more. Samsung and Google can still fare better during when smartphone sales become rocky. However, Apple relies on the iPhone for around 60% of its overall revenue. The question is that can Apple return to impressive growth figures that we've already witnessed with the previous models
Samsung maintained the top position, gaining a little more market share compared to that of last year's. "Samsung had a near 10% more market share over Apple for the second quarter. Furthermore, its Galaxy A and J lineup allowed it to compete with Chinese manufacturers and capture share in emerging markets. Apple, on the other hand, saw a decline in sales with a fall of 26 per cent in the Asia-Pacific region", reads a Gartner report.
Apple will of course leave no stone un-turned to exploit this opportunity and make up for the slump in sales from the upcoming iPhone 7.
The Apple iPhone 7 launch event is set to take place on 7 September at the Bill Graham Civic Auditorium in San Francisco.
Edited by Abha Srivastava