The Samsung Galaxy Note 7 is dead after less than 8 weeks from initial availability. Now it's time for the repercussions.
Samsung had what appeared to be the perfect business-meets-personal device in the Galaxy Note 7. The reviews were strong, the device was sleek and it appeared that Samsung had one-upped Apple's iPhone 7, which was supposed to be an incremental upgrade.
And then batteries started fires. Samsung moved quickly with a recall that had its issues and replaced devices. Then those replacement devices started catching fire too. Production ends abruptly. It's rare that a company conducts a recall and then the fix is just as faulty.
Now the Samsung Galaxy Note 7 could become a collector's item--albeit one that's a bit dangerous. What remains to be seen is how Samsung's brand is hit in the long-run. Make no mistake that there's a lot riding on the Samsung brand. Consider:
The Galaxy Note 7 was a flagship device that unified Samsung's high-end smartphones.
Samsung's Galaxy Note 7 was a device that carried the innovation flag for the company. Sure, semiconductors and displays also scream innovation for Samsung, but components aren't as personal as smartphones.
The company has a budding business-to-business unit that would have benefited from the Galaxy Note 7.
And Samsung's handling of the recall, return and then ultimate end of the Note 7 raises many questions about the company. That handling could impact all of Samsung's product lines in the home.
Initially, there's no need to panic. Toyota (faulty pedals), Takata (air bags), Merck (Vioxx), Johnson & Johnson (Tylenol) and many other companies have all had massive product recalls and recovered. The fact that the Galaxy Note 7's product cycle went a bit more than 7 weeks indicates that the damage could be limited.
Macquarie analyst Daniel Kim said in a research note:
The prolonged negative publicity does not help Samsung brand value. However, as long as this is a fleeting issue and can be fixed in the coming Galaxy S8 phone.
That view may be optimistic. Here's the rub. The Galaxy S8 is going to suffer some fallout. There will inevitably be a punch line or two. And a Galaxy Note 8 will face intense scrutiny. Battery jokes will persist.
Here's a look at the fallout:
Samsung's brand as an engineering and device innovator takes a hit. There's no way around the fact that Samsung rushed the Galaxy Note 7 out too quickly. The company needs a full investigation and post mortem about what went wrong. Controls need to be revamped. And Samsung has to conduct and publish its internal investigation publicly and transparently.
Google could become a high-end hardware maker. Google launched its latest smartphone with the Pixel and Pixel XL last week and outlined a series of innovations that are interesting. The problem for tech buyers is that the price is high for the Pixel. However, Samsung may cede that premium price point position and Google could grab it.
Apple gains. The iPhone 7 is an opening act for the 10th anniversary device next year, but Apple has solidified its reputation for quality at Samsung's expense.
The Android ecosystem heads to the bottom. Samsung is the strongest hardware player in the Android ecosystem. Samsung's issues with the Galaxy Note 7 will entice a bevy of lower-end rivals to move up market. There's a reason that Google is taking its own hardware fate into its hands--the Android hardware field has a lot of questions. See: Made in China: Four horsemen of the iPhone apocalypse.
Samsung takes a big financial hit. From development to dud to dead Samsung will lose a lot of money on the Galaxy Note 7. Some of the technologies such as iris scanning will live on, but the development of the Galaxy Note 7 will deliver no returns. Samsung has its component businesses that carry the company, but the costs are going to be high.