Samsung's challenge with the Galaxy S7 can ironically be found in a missive about Apple's prospects in the smartphone market.
Pacific Crest Securities analyst Andy Hargreaves said in a research note about Apple's iPhone 7 upgrade cycle:
Replacement cycles aside, we believe we have clearly entered a period of limited growth in high-end smartphones. This is due in part to the strong likelihood that incremental hardware innovation will have diminishing consumer value. This is a permanent shift, in our view; software and Internet services drive the bulk of consumer value in smartphones, and incremental hardware features do not seem likely to materially improve the experience from current levels. This has negative implications for replacement rates and pricing over time.
Enter Samsung's Galaxy S7.
The reviews for the Galaxy S7 have landed and most takes indicate that Samsung did what it had to. The company listened to its customer base, brought back features like the MicroSD slot and created a water resistant device that may have an improved camera.
CNET's Jessica Dolcourt noted that the Galaxy S7 is too similar to the S6 to entice an upgrade. Ditto for the S7 Edge. The phones are fine. A tour of Samsung's New York technology and culture showplace highlighted tables of the devices that felt great in my hand.
Also: Samsung to start S7 leasing program | Samsung's 837 in New York: Nice playground, but massive marketing expense | LG pits G5 vs. Samsung's Galaxy S7 to woo tech buyers | LG G5 vs. Samsung Galaxy S7: Which is the new flagship Android smartphone?|Samsung launches Galaxy S7, S7 edge: Is it worth an upgrade? | Will Galaxy S7 keep Samsung in pole position? | See CNET take on S7, S7 edge and LG's G5.
Just not great enough to ditch my Galaxy Note 5. Aside from the latest Android, a MicroSD card and a 12-megapixel camera that is supposed to be an improvement from the previous 16-megapixel on, the Galaxy S7 pair is incremental. All smartphones are now incremental.
In the land of high-end Android, LG's G5 has more unique features with its modular design.
Nevertheless, some analysts are predicting the Galaxy S7 will outsell its predecessor. Credit Suisse analyst Keon Han said the S7 is likely to be more profitable and move more units than the S6. Han said:
The GS7 launch is earlier this year. The annual volume contribution is typically about 3 million in the launch quarter. About 7 million units of GS7 are expected to be shipped in 1Q16. The bill of materials cost is improving as the GS6 platform has been extended. Current estimate calls for GS7 sales to surpass GS6 volume.
In a nutshell, Samsung will move more Galaxy S7 units at a better profit margins and potentially price. From a business perspective it's a win for Samsung. From a gadget lust perspective, the Galaxy S7, like the smartphone market in general, will be incremental.